1Q’24 EBITDA of PLN 14.8mn i.e. 3% above our forecasts - 31.05.2024

Stalprofil has published its 1Q’24 earnings with following highlights:

■ Revenues of PLN 349.3mn (-31% y/y and +11% q/q), including Steel segment of PLN 188mn (-18% y/y) and Infrastructure segment of PLN 161mn (-41% y/y)

■ Gross profit amounted to PLN 33.3mn, including Steel segment of PLN 16.1mn and Infrastructure segment of PLN 17.2mn

■ Gross profit margin of 9.5% (+1.2pp. y/y and -0.1pp. q/q), where Steel segment gross profit margin amounted to 8.6% (-0.3pp. y/y and +2.1pp q/q) and Infrastructure of 10.7% (+2.8pp. y/y and -4.1pp. q/q) ■ EBITDA amounted to 14.8mn and EBITDA margin of 4.2% (+0.7pp. y/y)

■ Net profit (parent company) of PLN 5.1mn vs. PLN 6.7mn year ago

■ Net debt of 104.5mn, which implies of ND/EBITDA LTM of 2.0x

■ OCF of minus PLN 26.9mn vs. PLN 59.0mn a year ago

■ AGM has approved dividend payment of PLN 5.25mn i.e. DPS of PLN 0.30 and DY of c. 3.3%, div. date of 21.08 and payment date of 11.09

 

Our view: NEUTRAL

We view 1Q’24 results neutrally, as revenues are lower by 4% vs. our assumptions and EBITDA is 3% higher vs. our assumptions, which means we estimated EBITDA margin of 3.8%, where Stalprofil reported EBITDA margin of 4.2% in 1Q’24. Gross profit from steel division is slightly higher vs. our forecast (STF reported PLN 16.1mn vs. our fcst. of PLN 15.6mn) as in 1Q’24 we have not seen a large steel fluctuation with relatively flat q/q price. The infrastructure segment generated gross profit margin of 10.7% vs. 7.9% a year ago. In the last few quarters infrastructure segment didn’t report as many agreements as it was a few quarters ago and STF had to replace them with smaller contracts which are reflected in the current results. However, as we can observe in FY’24 the larger offers organized by GazSystem have started to appear. Stalprofil has reported in last Gas-System tenders as the most favourable offer under FSRU project with a net value of PLN 87.1mn and PLN 98mn. Also, Stalprofil’s offer was considered the most advantageous in the proceedings organized by GazSystem for the construction of the Wężerów-Przewóz DN700 gas pipeline worth PLN 163.9mn net with the length of a gas pipeline is c. 44km which implies average 3.7mn PLN per kilometre which indicates favourable conditions. It needs to be mentioned that the tenders have been reported as the most advantageous in the proceedings but Stalprofil still needs to confirm it in a separate ESPI with the signing of the contract. Also, at the beginning of 2024 Stalprofil signed a contract with Gaz-System for the supply of steel pipes for the construction of the DN700 MOP 8.4 MPa Wężerów - Przewóz gas pipeline, about 16 km long with the maximum value of the contract of PLN 31.9mn net. The works will be carried out between Aug’24 and Dec’24. It shows that the company's backlog in the infrastructure segment may be higher in subsequent quarters and could support results due to lower volumes in the steel segment in the next quarters. The ND/EBITDA LTM ratio increased but remains at a secure level of 2.0x. In 1Q’24 net income (parent company) amounted to PLN 5.1mn, where assuming current market capitalization of c. PLN 160mn, it implies P/E ratio of 11.2x.