"Target Capital" lowers target price for "Electroargeş" stock, but maintain recommendation to "hold"

Analysts of "Target Capital" estimate a target price of 0.44 lei for shares of household appliance maker "Electroargeş" Curtea de Argeş (symbol: ELGS), 29.02% over the price at which shares of ELGS were trading yesterday and 11.78% below the price estimated in a report drawn up by the company in October. "Target Capital" recommends "hold" for ELGS shares.

Andrei Rădulescu, financial analyst at "Target Capital", said that the difference the October forecast and the current one comes on the back of increased risk, both domestic and international.

In the first nine months of 2009, the company had a turnover of 51.4 million lei, down 5% YOY. Operating revenues dropped 7%, while operating expenses dropped 8% YOY. This led to an operating profit increase of 7%, to 2.8 million lei, the report by "Target Capital" shows.

The company lost 0.8 million lei from financial operations at the end of Q3 2009. Thus, Electroarges had a net profit of 1.6 million lei, up 12% YOY.

Andrei Rădulescu added: "In our opinion, the company posted good results, especially if we take into account the difficult macroeconomic context. The company"s turnover only dropped 5% YOY at the end of Q3 2009, whereas wholesale distribution of household appliances dropped 7.8%, and retail sales of household appliances dropped 19.3% compared to Q3 2008. At the same time, the results of the company beat our October estimates".

The analyst from "Target Capital" considers that the depreciation of the leu over the course of the last few semesters had a positive influence on the company"s results, given the fact that exports account for most of the company"s turnover (74% in 2008) (the euro and the dollar appreciated 16% and 30% respectively against the leu compared to the same period of 2008).

"It needs to be mentioned that the company saw its wholesale and retail sales of household appliances stabilize in the third quarter, (a quarterly increase of 1.05%, and 4.63% respectively, with seasonally adjusted data)", said Mr. Rădulescu.