ANALYST COMMENT – Relpol Q2’22 RESULTS
The report was prepared by Dom Maklerski BDM at the request of the WSE as part of the Exchange's Analytical Coverage Support Programme
Last recommendation BDM: BUY with target price 11,1 PLN/share (23.05.2022) LINK
- Revenues in Q2'22 amounted to PLN 37.1 million (+8% y/y), 8% above our assumptions. The dynamics was influenced by high demand for industrial automation components and higher selling prices.
- The German market (+6% y/y) still had the largest share in the sales structure. The increase in revenues is largely the result of the higher EUR/PLN exchange rate. We estimate that sales in EUR in Germany increased by 3% y/y.
- Sales in Poland maintained good dynamics (+18% y/y). Domestic revenues were 12% above our expectations.
- Revenues from the Russian market (Relpol Eltim) amounted to PLN 3.0 million in Q2'22. The subsidiary's assets were written off at the end of June (a PLN 2.7 million write-off included in financial costs). Relpol Eltim's net loss was PLN 91 thousands in H1'22.
- The gross margin dropped significantly to 17% (slightly below our expectations). Profitability was adversely affected by the cost of manufacturing products (material prices, labour costs, the creation of additional assembly stations due to the reduction in production in Ukraine). According to the management, the Ukrainian plant is currently operating at 85% of its pre-war capacity. Over the next two months, it is planned to increase the production and return to the pre-war potential.
- EBITDA amounted to PLN 2.4 million, 13% below our assumptions. R&D write-offs in the amount of PLN 0.7 million had a negative impact.
- Q2'22 gross profit was encumbered by the aforementioned write-downs on Russian assets. Due to sanctions and communication problems, the control over the Russian company is severely limited.
- The net loss in Q2'22 amounted to PLN -2.4 million. Two one-off events that were not included in our assumptions had a large impact.
- Cash flows from operating activities amounted to PLN +2.7 million, CAPEX in the last quarter amounted to PLN 2.1 million.
- Net debt amounted to PLN 9.9 million (PLN 3.4 million a year earlier). It was higher than our expectations.
BDM Comment: Due to the write-offs, the company reported a net loss in Q2'22. Note that at the end of August Relpol announced the planned asset write-off in Russia. Revenues were above our expectations. This is the result of taking into account the revenues from the Russian company, which will not be consolidated in subsequent periods. We assume that the company will want to allocate this volume to other markets. The gross margin on sales in Q2'22 was the lowest for several years. However, the company emphasizes that the increase in product prices, the fall in raw material prices and the restoration of production potential in Ukraine may help to gradually rebuild the margin. In the report, the management board also points to the deteriorating market conditions and macro outlook, which makes it difficult for it to assess the outlook for H2'22.
Analyst: Kajetan Sroczyński Kajetan.sroczynski@bdm.pl tel.: (+48) 668 516 977
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