Cairo - Mubasher: Pharos Research has maintained their target fair value (FV) for Arabian Food Industries Company (Domty) at EGP 10.12, with an Equalweight recommendation, according to a recent report.
After the Egyptian pound flotation, Domty recorded FX losses of EGP 19 million, and the corridor rate has increased by 3% post floatation.
“In turn, Domty’s interest expense should have spiked by around EGP 4.1 million during the 2 months post flotation on the merits of the rate hike alone,” the report stated.
Domty’s main goal is to regain margins as swiftly as possible, it added.
Management is fully aware of the situation and have identified a more flexible pricing strategy as the key to margin recovery, according to Pharos.
Domty has adopted a reserved pricing approach since the emergence of the FX squeeze and did not increase their prices as rapidly as some other food and beverages manufacturers which has reflected positively on their market share position since the company continues to be the leader in the cheese industry.
“Consequently, the witnessed volume declines are market-wide and not company specific. Further price increases should recover margins gradually and as consumers start accepting price hikes, volumes could start recovering once again,” the report noted.
“Management has delayed its cheese sandwiches and Roumy cheese products pending stabilization in the FX rate and inflationary pressures. They have also stated that they are currently considering exporting opportunities to Ethiopia,” it further added.
