Recommendation for AD Plastik share
Erste Bank has informed that their analysts have raised a one-year target price for AD Plastik share from HRK 105 to 121. Given that the expected yield amounts to approximately 30 percent, recommendation for AD Plastik share for investors has been raised from the level accumulate to the level buy.
They have stated that AD Plastik’s results for the nine months turned out to be better than expected, while profitability in subsidiaries has improved despite the poor situation of the Russian automotive market. For this year Erste analysts predict revenue growth of approximately 17 percent, along with doubling Earnings before Interest Tax Depreciation and Amortization (EBITDA) to approximately HRK 110 million. In the next year growth could slow down to just over three percent but with an additional EBITDA improvement of around eight percent.
Notification also states that, regarding completed investment cycle, capital investments in the next two years could be significantly lower than in previous years, which could release additional liquid assets. AD Plastik Group has already lowered the level of indebtedness in this year and along with expected solid cash flows it seems likely that the company could start pay dividends again and that could trigger a positive market reaction.
Despite the expected revenue drop in the Russian subsidiaries of about 17 percent in this year, analysts estimate that it will be significantly milder than in Russian automotive market for which about 30 percent lower production has been predicted. AD Plastik has succeeded in expanding projects and clients base in the Russian market and the normalization of production process and internal savings have resulted in margin stabilization.
An additional impulse to good results of AD Plastik was recovery of the European automotive market that has ensured full capacity utilization in the parent company. Further revenue growth in the parent company is expected in Erste Bank, although it will slow down compared to the years 2014 and 2015, given the already high base and capacity utilization. Erste Bank emphasized that growth in the parent company has been stimulated by project Edison that got more and more serious in the second half of 2014 and it included deliveries for the vehicles Renault Twingo and Smart 2S and 4S.
