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Investment case • A local and global leader • A vertically integrated business model • Growth potential in the international markets • Rising costs of raw materials is the company’s main concern • Competition from Turkey and China has been rising rapidly • Demand is cyclical in nature Upside Catalysts • Faster-than-expected recovery from the current political and economic unrest • Increasing polypropylene capacities in the local market once the new Egyptian Propylene & Polypropylene Company (EPPC) starts its operations in 2011. • Establishment of the new industrial complex that will add over 40mn sqm of woven capacity. • The new fiber plant— expected to start its operations in 1H11— should help the company source its fiber needs locally instead of relying on imports. Downside Risks • Higher-than-expected polypropylene prices. • Uncertainties surrounding the export incentive program. • Delays in establishing the new industrial complex will limit the company’s growth potential. • Slowing local demand due to inflationary pressures and economic instability. Oriental Weavers Carpets (OWC) Company Profile Oriental Weavers Carpets [ORWE] is Egypt’s leading carpet manufacturer, with a local market share of 85%. The company also has a strong position within the global market with its US market share reaching 25%. One of ORWE’s subsidiaries, MAC, captures about a third of the world’s jet printed rug market. Exports contributed around 60% of OWC's top line in FY10 with sales to the US and Europe constituted almost 51% to total sales. OWC adopts the vertical integration method in its manufacturing process. OWC processes its own polypropylene fiber, which is converted into yarn, and it also manufactures and distributes finished products. Shareholder Structure • Khamis Family 62% • Institutions 23% • Fitaihi Holding Group Co 5.5% • Misr Insurance 4.5% • Retail 5% 52-Week Performance & (*EGX suspended between 27 th Jan – 23 rd Mar 2011) ORWE.CA/ORWE EY | Buy Recommendation | Moderate Risk | LTFV EGP39 | Target Price EGP39 | Analyst: Ingy El- Diwany Key Performance Indicators EG P m n/FY E D ecem ber 2007a 2008a 2009a 2010a 2011e 2012e R evenue 3,067.1 3,442.4 3,550.6 4,059.7 4,263.5 4,578.6 G rowth R ate (% ) 5.0 12.2 3.1 14.3 5.0 7.4 EB ITD A 517.5 550.2 518.3 591.0 575.3 611.6 G rowth R ate (% ) 7.1 6.3 -5.8 14.0 -2.7 6.3 EB ITD A m argin (% ) 16.9 16.0 14.6 14.6 13.5 13.4 NetIncom e 328.2 311.1 312.3 322.1 340.7 363.0 G rowth R ate (% ) 21.0 -5.2 0.4 3.1 5.8 6.6 N etm argin (% ) 10.7% 9.0% 8.8% 7.9% 8.0% 7.9% PER 8.7x 9.2x 9.2x 8.9x 8.4x 7.9x P /BV 1.2x 1.1x 1.1x 1.0x 1.0x 1.0x EV/EB ITD A 7.8x 7.9x 7.9x 7.5x 7.1x 6.4x N etdebt/EB ITDA 2.3x 2.7x 2.3x 2.7x 2.1x 1.8x D ividend Yield 2.9% 10.4% 7.8% 6.3% 7.5% 8.0% S o urc e: C IC R D atabas e Sector: C onsum erG oods ISIN : EG S33041C 012 LastP rice (EG P) 31.82 52 W eek H igh 36.60 52 W eek Low 25.70 100-dayA v. Volum e 105 (000' shares perday) N o. ofShares (m n) 90.0 M arketC ap (EG Pmn 2,864 *P rices as atclose on 30th M ay2011 - 1,000 2,000 3,000 4,000 5,000 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 Jun-10 Aug-10 Oct-10 Dec-10 Mar-11 May-11 Shrs('000) EGP Volume ORWE EGX 30rebased
