- Despite a favorable polypropylene price outlook, we see ORWE’s operational performance normalizing on stable FX
- We expect total revenue to grow at a 2025 –30e CAGR of c7%, GPM to average c12%, and NPM margin to average c9%
- In a recent report, HC Brokerage presented their evaluation of Oriental weavers forecasting the company’s performance to gradually normalize amid EGP stability.
Pakinam El-Etriby, Consumers Analyst at HC commented that: “ORWE to benefit from lower oil and polypropylene prices in 2026e, followed by gradual normalization amid EGP stability: ORWE historically benefited from times of EGP devaluation, given that exports account for more than c50% of its total sales. In 2024, total revenues rose by c38% y-o-y to EGP24.3bn, supported by a c41% y-o-y increase in export prices to EGP227/sqm following the 6 March EGP devaluation, and c28% y-o-y rise in local prices to EGP191/sqm. Consequently, its adjusted gross profit margin (GPM), excluding inventory write-downs of cEGP271m in 2Q24 and cEGP500m in 4Q24, would have reached c16%, compared to its reported GPM of c13%. In 1Q25, the company continued to benefit from the residual effects of the EGP devaluation, with export and local prices increasing by c39% y-o-y and c27% y-o-y, respectively, leading to a c27% y-o-y increase in total revenue to EGP6.40bn. Revenues for 2Q25 and 3Q25, however, increased modestly by c7% y-o-y to EGP6.17bn and EGP6.90bn, respectively, with local and export prices normalizing. As a result, we expect 2025e GPM to stand at c12%. In 2026, we expect GPM to improve to c13%, primarily due to an anticipated decline in oil prices, which should translate into lower polypropylene costs. Moreover, the massive overcapacity in the global chemicals sector and increased trade tensions have weakened near-term recovery prospects, a situation that could further deteriorate in 2026 amid expected large capacity additions from China, according to Fitch. Consequently, this outlook reflects softer petrochemical pricing amid global oversupply from these capacity additions, which, in our view, is likely to reduce polypropylene prices, as evidenced by recent price trends. Oil prices are expected to drop to USD61.3/bbl in 2026e from an average of USD68.1/bbl in 2025e and USD79.9/bbl in 2024, according to Bloomberg.”
“We forecast ORWE’s revenues to grow at a 2025–30e CAGR of c7% driven by higher average selling prices and muted volume growth: We expect 2025e revenues to increase by c7% y-o-y to EGP26.0bn (c6% below our prior estimate), supported by a c11% y-o-y rise in average selling price (ASP) to EGP238/sqm (c1% above our prior estimate), yet a c4% y-o-y decline in volumes to 110m sqm (c7% below our prior forecast). We anticipate export revenues accounting for c67% of total revenues (vs. c65% previously), reflecting a favorable base effect as 1Q25 was still impacted by the EGP devaluation. We estimate 2026e revenues to grow by c3% y-o-y to EGP26.9bn (c13% below our prior estimate), driven by a c8% y-o-y increase in ASP to EGP239/sqm (c4% lower than our prior estimate), assuming easing inflation rates and relatively stable FX rates, and a c3% y-o-y increase in volumes to 113m sqm (c9% lower than our prior estimate). We forecast a c64% export contribution to total sales (vs. c63% previously). Over 2027–30e, we forecast a c8% revenue CAGR, underpinned by a c6% increase in ASP and c2% growth in volumes. We expect 2025e GPM to stand at c12% (vs. c14% previously), down c1 pp y-o-y and further to c13% in 2026e (vs. c14% previously), assuming a decline in oil and polypropylene prices. Over 2027–30e, we forecast GPM to average c12%, gradually normalizing to c11% by the end of our forecast period. We forecast 2025e EBIT margin to narrow by 1.90 pp y-o-y to 8.99%, on GPM contraction and c29% y-o-y decline in export rebates to EGP421m, with the government’s recent reduction of export rebates/total exports to c4% from c7% previously. In 2026e, however, we expect a 2.46 pp y-o-y expansion in EBIT margin to c11%, supported by GPM improvement and a c87% y-o-y increase in rebates to EGP786m, including an EGP100m from government backlog out of a total EGP400m to be received in cash, and higher exports which now include the US market following the shutdown of its US factory, increasing its exports from Egypt. Over 2027–30e, we expect EBIT margin to average c10%, with export rebates growing at a CAGR of c3%, reaching EGP892m by the end of our forecast period. During 2026e, we expect a capital gain of cEGP482m from the sale of its US machinery and two buildings. Consequently, we expect net profit margin (NPM) to stand at c8% in 2025e, c11% in 2026e, and to average c8% over 2027–30e.” Pakinam El-Etriby concluded.
About HC Brokerage
HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt, Dokki 12311
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