The largest lead-acid battery producer in Bulgaria, Monbat, booked third consecutive quarter of strong results on rising volumes and surging LME prices. The fundamentals power surge together with a bullish market sentiment – these led to a 30% stock rally over the last three months.
9M results – margin sustained above regional peers
Monbat delivered another set of strong quarterly results with 9M reports. Margins sustained above regional peers despite the surge in costs. In 3Q16 top line added 7.1% y/y to BGN 66.9m but EBITDA expanded 40% to BGN 12m or sustaining the 18% margin. Net profit surged by 49% y/y to BGN 6.6m. The results came from rising volumes and fast appreciating lead commodity prices. Preliminary 10M16 data signal further improvement on the top and bottom line.
Better margin control
Beginning of 2016 Monbat changed its inventory model from order-to-make to make-to-order thus accumulating higher inventory. The latter aims better margin control in times of volatile lead but at higher working capital demand. So far it is profiting as it is well equipped to take on fast appreciating LME at its higher season. However, it is only another partial hedge to excessive LME volatility in addition to lead recycling. We don’t foresee latest LME surge sustainable but could add short term marginal effect on the top and the bottom line.