Korado Bulgaria

Bulgaria’s only steel panel radiator producer Korado Bulgaria strengthened its financial results in FY2017, confirming its position of a wellmanaged and profitable company in a rather mature sector with strong competition from European and global peers – this is what ELANA Trading analysts say in their updated corporate profile for the Company.

Rise in top line and profitability

Korado Bulgaria’s top line grew by 30.7% y/y to BGN 42.6m in FY2017 on both rising volumes (up 14.3% y/y) and rising prices in the EU. The latter was a result of wellimplemented strategy in the Company’s target markets. Top line fundamentals matched our expectations as Korado managed to transfer the surge in material costs to customers.

Despite surging raw materials costs, operating and net profitability improved considerably. Average LME steel prices advanced 20% y/y while Korado Bulgaria’s material costs added 29% y/y. Still, EBITDA grew 50% y/y to BGN 6.5m and EBIT surged by 62% y/y to BGN 5.4m in FY2017. Net income surged by 63% y/y to BGN 5.3m on booming capacity utilization and well-managed operating expenses.

Also, while competitors were squeezing margins, the Company was expanding with profitability rising above key competitors’ results. EBITDA margin added 190bps to 15.3% while net income margin is up c.350 bps to 12.5% in FY2017.

Expanding presence in target markets

During the year, Korado Bulgaria succeeded in boosting its sales in target markets in Hungary, Bosnia and Romania. Sales in Hungary surged by 300% y/y reaching BGN 3m while sales in Romania advanced by 65% y/y to BGN 6.9m. Bosnia grew by 139% y/y yet to the modest amount of BGN 110k. Sales in Ukraine stayed flat at BGN 3.4m. As a result Korado did meet its 2017 goal to keep its positions in key markets (Ukraine and Bosnia) and outperformed in others (Hungary and Romania).

Lucrative stock return

Korado Bulgaria’s stock price has doubled in 2017 with multiples up by a third. Nevertheless, latest financial results signal further room for multiples expansion as well as lucrative dividend return. Considering an 80% average payout ratio for the last three years, ELANA Trading analysts’ raise their DPS expectation from BGN 0.28 to BGN 0.32 per share, yielding a 4% return at current market quotes.

Korado Bulgaria is listed on the Bulgarian Stock Exchange, trading on the top Premium segment of the market. It is part of the BGBX40 market index tracking the 40 top traded stocks on the market. As of October 2017 the Company also works with ELANA Trading as market-maker.

Korado Bulgaria’s stock price

About Korado Bulgaria

Korado Bulgaria is a leading steel panel radiator producer in Bulgaria. The Company is part of the Czech Korado Group, being a low cost manufacturing base.

The Company’s core operations are steel panel radiators with 1.2 million pieces per annum capacity under 4 shifts operations with single type of radiators. The Company’s main products in the segment are positioned both on the premium and low price end of the market with two corresponding brands – Kingrad and Radik, respectively.

In April 2016, Korado added tubular bathroom radiator production capacity, manufacturing 51k pieces for the first year of the line’s operation. Bathroom radiator capacity under a 4 shifts operational scheme is estimated by the Company at 170k pieces per annum.

Approx. 70% of the Company’s production is distributed via the parent company in the Czech Republic. The Group has also strong market positions in Romania, Ukraine, Russia and the Balkans and has recently started balancing out its influence with orders from mature markets in Western Europe.

Check the latest equity research report on Korado Bulgaria in ELANA Online