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Securities & Investment

Category: HC News

HC expects the CBE to keep the policy rates unchanged

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, the Research Dept. at HC Securities & Investment expects the CBE to keep the policy rates unchanged at its upcoming May 21, 2026 meeting.

Financials analyst and economist at HC, Heba Monir commented: “The regional geopolitical turbulence from the US-Israeli war against Iran, which began on 28 February, is still affecting the global economy as and Egypt. Egypt’s improved external position and flexible exchange rate managed to relatively absorb the conflict’s implications until now. Despite Egypt recording net foreign outflows of USD3.2bn from its treasury secondary market from 19 February until the end of April, its net international reserves (NIR) increased by a total of USD263m in March and April to a record USD53.0bn in April, while deposits not included in the official reserves declining by a total of USD2.60bn in March and April to USD10.8bn; however, Egyptian banks’ net foreign assets (NFA) dropped significantly by USD8.18bn during February and March, to USD21.3bn by the end of March, mainly due to the net foreign outflows from Egypt’s treasury market, leading to a c10% y-t-d EGP devaluation to EGP52.9/USD, as of 15 May, showing exchange rate flexibility. Domestically, the government raised diesel, LPG cylinders and octane gasoline prices in March by an average of c19% on 10 March and the natural gas for the industrial sector (cement, iron, steel, non-nitrogen fertilisers, and others) on 3 May, due to mainly a c51% surge in oil prices to USD109/bbl, in addition to a c58% increase in natural gas prices (Dutch TTF – Front month futures) to USD17.1/MMBtu and c5% increase in wheat prices to USD244/ton, which pressure the FX liquidity and will result in inflationary pressures, in our view. To prevent dollarization and tighten money supply, public banks increased the interest rate on newly issued three-year certificates of deposit (CDs) by around 1.25% to an average of 17.25%, prompting private banks to follow suit and issue similar products with a higher minimum amount per CD; which should also help limit inflation acceleration and support pensioners who rely on high-yielding CDs. Regarding the treasury yield, the CBE slightly reversed the direction of interest rates on treasuries to keep the carry trade attractive, where the latest 12M T-bills auction of 24.4% implied a positive real interest rate of 4.57% using our 12M inflation estimate of c16% (after deducting a 15% tax rate for European and U.S. investors). Therefore, given the geopolitical risks and their implications for Egypt’s USD resources, our upward revision of inflation estimates, the need to maintain the carry trade attractiveness, and the budget deficit targets, we expect the MPC to keep interest rates unchanged at its 21 May meeting.”

It is worth mentioning that, at its 2 April meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) maintained the benchmark overnight deposit and lending rates at 20.0% and 21.0%, respectively, reversing a total of 825 bps since 2025 of a total 1,900 bps rate hikes since the CBE started its tightening policy in 2022. The MPC also reduced the required reserve ratio (RRR) for commercial banks by 200 bps to 16.0% from 18.0% in February 2026. Egypt’s annual headline inflation decelerated to 14.9% y-o-y in April from 15.2% y-o-y in March, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices increased by 1.1% m-o-m in April, compared to an 3.2% m-o-m increase in March. On the global front, on 26 April, the U.S. Federal Reserve maintained the target range for the federal funds rate at 3.50-3.75% with total cuts of 175 bps since September 2024, after it hiked rates by 525 bps since it started tightening policy in 2022, and on 30 April, the European Central Bank (ECB) maintained the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility at 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

About HC Securities & Investment

 HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP5.6bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

HC forecasts CIB’s net income to increase

Posted on by Marwa Nakhla

Commercial International Bank

  • Although Egypt’s external position could be affected by the regional conflict, economic reforms and mitigation efforts cushion the impact
  • We expect the regional war to delay monetary easing, which supports banking sector profitability in 2026; CIB stands out, in our view  

  • HC Brokerage research department released their evaluation of CIB stock expecting Egypt’s banking sector profitability to benefit from a delayed easing cycle and a lower RRR

 

Economist and financial analyst at HC, Heba Monir commented: “Egypt’s economy remains resilient amid geopolitical tensions; however, the easing cycle would be delayed, in our view: Egypt’s external position showed resilience at the beginning of the year prior to the outbreak of the US-Israeli war against Iran, as demonstrated by net international reserves exceeding a record USD52bn by the end of February, and the banking sector’s net foreign asset (NFA) position surpassing USD29bn by the end of January. However, the war triggered net foreign outflows of around USD7.09bn from Egypt’s T-bill secondary market since 19 February to date, leading to a c11% depreciation of the EGP against the USD to EGP53.6/USD, showing exchange rate flexibility. The war also led to a c43% surge in oil prices to USD102/bbl, which pushed the government to increase diesel, LPG cylinders, and octane gasoline domestic prices by an average of c19% to keep the budget deficit close to its target of 7.3% of GDP since the FY25/26 budgeted oil price was USD75/bbl and the budgeted exchange rate was EGP50/USD. Therefore, we upwardly revised our estimate for the annual headline inflation in March to 14.3% y-o-y and 2.4% m-o-m, and to an average of c14–15% y-o-y over 2026 from c10–11% y-o-y before the outbreak of the conflict, which could delay the easing cycle in our view. Having said that, we believe that the Egyptian economy is in a stronger position than at the beginning of the Russia-Ukraine war in February 2022, which triggered USD21bn of net foreign treasury outflows, as its external situation is now stronger with an NFA position of USD29.5bn as of January 2026 versus USD0.62bn in January 2022 and Egypt now has a flexible exchange rate with no FX parallel market, unlike the situation in 2022. However, the implications for Egypt would depend on the war’s duration, as its USD sources, including tourism, the Suez Canal, and worker remittances, could be significantly affected, especially remittances from Egyptian expats working in the GCC countries. We based our view on an assumption that the war would end before the end of 2Q26.”

 

“We expect Egypt’s banking sector profitability to benefit from a delayed easing cycle and a lower RRR: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) began its first meeting in the year with a 100 bps rate cut, bringing the total policy rate cuts to 825 bps since the beginning of 2025 to date, compared to total hikes of 1,900 bps since the CBE began its tightening policy in 2022. The CBE also reduced the required reserve ratio (RRR) by 200 bps to 16% on 12 February, to stimulate liquidity and lending activity in the banking sector. Given resilient banking parameters and the banking sector’s total assets growing by c24% y-o-y to EGP24.0trn as of June 2025, representing c132% of GDP in FY24/25, we expect this growth to continue. Following the outbreak of the war, we updated our inflation estimates and revisited our expectations for rate cuts for the rest of 2026, to 200 bps at best, pending a resolution to the regional conflict by 2Q26. Over the past twelve months, large banks lowered the interest rates on their three-year certificates of deposit (CDs) to 16–17%, from more than 20% after the March 2024 EGP devaluation, which we still see as attractive, as it translates into a positive real interest rate of 4-5%, based on our calculations. Accordingly, we forecast customer deposits to grow by c12% y-o-y to EGP17.9trn by December 2026, versus an estimated increase by c17% y-o-y for December 2025. Over the past five years, private sector loans to total market loans dropped to c43% in June 2025, from c62% in June 2020, amid successive global and domestic economic challenges. For the time being, we do not expect this ratio to improve before 2Q27, as the conflict is delaying Egypt’s monetary easing. In 2025, working capital loans showed healthy growth, which we expect to continue in 2026, also impacted by the c11% EGP devaluation y-t-d. Hence, we expect the total sector’s loans to increase by c17% y-o-y to EGP11.6trn by December 2026, versus an estimated increase of c19% y-o-y for December 2025. We forecast the loans-to-deposits ratio to increase to c65% in December 2026 from c62% in June 2025. As for the sector’s profitability, we expect the average NIM to decrease to 5.5% from 5.8% in June 2025, given relatively lower y-o-y treasury yields, despite their recent post-war increase. Similarly, we expect the sector’s ROA and ROE to decrease to an average of 2.2% and 33%, respectively, from 2.6% and 39.0% in June 2025. Regarding the banking sector’s asset quality, we believe banks are well-provisioned; however, we expect a 100–200 bps decrease in the capital adequacy ratio (CAR) due to the EGP devaluation.” Heba Monir added.

 

HC’s economist concluded: “We forecast CIB’s net income to grow at a 5-year CAGR of c12%: We forecast CIB’s net income to increase moderately at a CAGR of c12% from 2025–30e, compared to the 5-year historical CAGR of c52% from 2019–24 (inflated by the EGP devaluation), driven by the bank’s ambitious investment strategy and expansion through launching a digital bank and its commercial banking operations. In this regard, we estimate the bank’s deposit market share to increase to a 5-year average of 7.57% from 2026–30e, up from 6.58% from 2020–24, driven by more CASA accounts, which currently represent more than c60% of its deposits. Similarly, we forecast CIB to expand its loan market share to a 5-year average 6.734% from 2026–30e, from 5.19% from 2020–24. Thus, we forecast net interest income to increase at a 5-year CAGR of c14% from 2025–30e, with an increase in the 5-year average NIM to 8.45% from 2026–30e from 7.55% from 2021–25, driven by the forecasted pickup in CAPEX lending by 2H27, and translating into a 5-year average ROE of 34.1% from 2026–30e compared to an average of 33.9% from 2021–25. We expect CIB’s asset quality to remain strong with a 5-year average NPLs of 1.35% of gross loans over 2026–30e, down from the 5-year historical average of 3.70% and a 5-year average coverage ratio of 313% over 2026–30e, higher than the 5-year historical average of 289%. For 2026e, we forecast the bank to book EGP2.09bn in provisions, following the recalibration of its Expected Credit Loss (ECL) model, implying a 5-year average of 0.2% of gross loans over 2026–30e, lower than its 5-year historical average of 0.7%.”

 

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

 

 

HC expects the MPC to keep interest rates unchanged

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, the Research Dept. at HC Securities & Investment expects the CBE to keep the policy rates unchanged at its upcoming April 2nd, 2026 meeting.

The regional geopolitical turbulence from the US-Israeli war against Iran, which started on 28 February, is affecting the world economy as well as Egypt. However, Egypt’s external position showed resilient parameters before the outbreak of the war, which relatively cushioned it against the external shocks, including: (1) net international reserves (NIR) increasing c11% y-o-y to a record USD52.7bn in February, and deposits not included in the official reserves hiking 1.26x y-o-y to USD13.4bn; and (2) Egyptian banks’ net foreign assets (NFA) position widening remarkably by c16% m-o-m and 3.39x y-o-y to USD29.5bn in January; Nonetheless, the war triggered net foreign outflows of around USD4bn from Egypt’s T-bill secondary market since 1 March to date, leading to a c9% depreciation of the EGP against the USD since 28 February to EGP52.6/USD, showing exchange rate flexibility, and it also led to a c48% surge in oil prices to USD107/bbl, which prompted the government to raise domestic diesel, LPG cylinders and octane gasoline prices by an average of c19% on 10 March, further increasing inflationary pressures.

Accordingly, we upwardly revised our estimate for the annual headline inflation for March to 14.3% y-o-y and 2.4% m-o-m, and to an average of c13-14% y-o-y over 2026 from c10-11% y-o-y before the outbreak of the conflict, which could delay the easing cycle in our view. Regarding the treasury yield, the CBE slightly reversed the direction of interest rates on treasuries to keep the carry trade attractive, where the latest 12M T-bills auction of 23.4% implied a positive real interest rate of 6.94% using our 12M inflation estimate of c13% (after deducting a 15% tax rate for European and U.S. investors). Therefore, given the geopolitical risks and their implications for Egypt’s USD resources, our updated inflation estimates, the need to maintain the carry trade attractiveness, and the budget deficit targets, we expect the MPC to keep interest rates unchanged at its 2 April meeting.

HC expects the MPC to cut the policy rates by 150-200 bps at its upcoming meeting

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, the Research Dept. at HC Securities & Investment expects the CBE to cut the policy rates by 150-200 bps at its upcoming February 12, 2026 meeting.

Financials analyst and economist at HC, Heba Monir commented: “ Egypt’s external position is showing resilience with: (1) net international reserves (NIR) increasing c2% m-o-m to a record USD52.6bn in January, and deposits not included in the official reserves also hiking significantly by c33% m-o-m (USD3.40bn) in the same month to USD13.7bn; (2) Egyptian banks’ net foreign assets (NFA) position widening by c8% m-o-m to USD25.5bn in December; (3) Egypt’s USD sources showing stability and improving with worker remittances increasing c13% y-t-d while decreasing c3% m-o-m in November to USD3.6bn, which still reflecting confidence in the FX liquidity in Egypt, Suez Canal revenues increasing by c18% y-o-y to USD365m in January 2026 and the tourism sector reporting record numbers in 2025; (3) Egypt’s current account deficit narrowing by c45% y-o-y to USD3.24bn in 1Q25/26; and (4) Egypt’s 1-year CDS declining remarkably to 176 bps from 336 bps a year earlier. All these factors had helped Egypt’s exchange rate to appreciate by c8% y-o-y against the USD. Domestically, the PMI index fell to 49.8 in January from 50.2 in December, and is still considered positive even though it fell below the 50 mark, as the PMI reading reflected that cost pressures remained weak and even softened in January, with total input costs rising at the slowest pace in ten months, which enabled firms to cut their own charges for the first time in five-and-a-half years. We expect consumer prices to cool to an average of 9.50-10% throughout 2026 and estimate January inflation to decelerate to 11.4% y-o-y, driven by a favorable base-year effect, in line with the CBE’s target range of 7% (+/- 2%) by 4Q26. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 23.5% implies a positive real interest rate of 8.99% using our 12M inflation estimate of c11% (after deducting a 15% tax rate for European and U.S. investors), suggesting that Egypt’s Carry Trade remains attractive. Also, the recent drop in Egypt’s CDS would lower the required yield on treasuries by foreign investors. As for geopolitical risks, even though they remain concerning, they have relatively eased after the U.S. and Iran agreed to resume talks, the U.S. expressed a desire to end the war in Ukraine by June 2026, and the Gaza ceasefire deal went into effect on 10 October 2025, although it was breached several times. Accordingly, given Egypt’s improved external position, the EGP’s appreciation, the high real interest rate, the slowdown in input costs, the relative easing in geopoliticial risks, and the expected decline in inflation rates, we see that the MPC has a window of opportunity to cut the policy rates by by 150-200 bps at its 12 February meeting, which would stimulate private sector and economic growth and lower the government’s local debt servicing cost, in our view.”

It is worth mentioning that, at its 25 December meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) cut the benchmark overnight deposit and lending rates by 100 bps to 20.0% and 21.0%, respectively, reversing a total of 725 bps of a total 1,900 bps rate hikes since the CBE started its tightening policy in 2022. Egypt’s annual headline inflation was stable at 12.3% y-o-y in December, similar to November, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices inched up 0.2% m-o-m in December, compared to an 0.3% m-o-m increase in November. On the global front, on 28 January, the U.S. Federal Reserve maintained the target range for the federal funds rate at 3.50%-3.75% with total cuts of 175 bps after it hiked rates by 525 bps since it started tightening policy in 2022, and on 5 February the European Central Bank (ECB) maintained the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility at 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022. Based on Egypt’s current economic situation, we present below our expectations for the possible outcome of the 12 February MPC meeting.

 

About HC Securities & Investment

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP4bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

HC: Orascom Development Egypt is Well-positioned for tourism growth and Red Sea interest

Posted on by Marwa Nakhla

  • Red Sea investments and tourism activity fuel value creation, offsetting possible primary home sales slowdown in 2026e

  • We forecast a 4-year CAGR of c20% for revenue, c18% for EBITDA, and c31% for net income on higher residential prices and tourism revenue, and gross margin expansion

HC Brokerage issued an update on Egypt’s real estate sector, highlighting Orascom Development Egypt’s performance and noting their expectation for significant value to be unlocked for ORHD.

Mariam Elsaadany, real estate analyst at HC Brokerage commented that: “Red Sea land revaluation and strong tourism revenue unlock significant value for ORHD: We expect 2026e to be a challenging year for the residential segment of the real estate sector, triggered by 1) high price level of real estate units amid weak affordability, 2) aggressive buying over 2023–2025 leading to a higer market supply of units, 3) declining interest rates, reflecting negatively on customers’ ability to finance units through interest income from certificates of deposit (CDs), and 4) easing inflation and stable EGP make investment demand less attractive. Accordingly, we do not expect a recovery in real estate demand before 2H26, which could lead to a market correction, with developers offering limited price increases on new launches. Also by 2H26, we expect the Central Bank of Egypt (CBE) to cut interest rates by a further 300 bps on top of the 725 bps in 2025, improving the purchasing power of Egyptian real estate buyers. Based on this sector view, we opt for companies with exposure to the hospitality sector, allowing them to bypass any potential residential slowdown and capitalize on the government’s focus on growing the tourism sector, especially following the official opening of the Grand Egyptian Museum (GEM). We believe ORHD is well-positioned to benefit from Egypt’s story in the short- to long-term. The unlocking of value in the Red Sea triggered by the announcement of Emaar Misr’s (EMFD EY) Marassi Red Sea bodes very well for the company’s c15m sqm of undeveloped land in El Gouna, in our view, as our calculation for Marassi Red Sea implies an NPV/sqm of EGP3,765/sqm. We believe this will reflect positively on ORHD over the medium term, despite expected higher competition in the short term. Additionally, we like ORHD’s impressive ability to market its units internationally, with c49% and c33% of 1H25 El Gouna sales and O West sales sold abroad, respectively. Given the government’s direction to increase tourism revenue and the increased demand for hotel rooms, we expect the CBE to launch additional initiatives to expand Egypt’s hospitality inventory, which would benefit ORHD.”

 

“We increase hotel room rates to account for improved hospitality operations, and normalize growth in real estate selling prices: With Egypt’s ambitious tourism targets, we expect a 4-year hospitality revenue growth of c20% for ORHD, along with an average GPM of c36% over FY25–29e on the back of an average occupancy rate of c75% in El Gouna and c40% in Taba Heights. We increase TRevPar in El Gouna to EGP8,891 by 2028e, from EGP5,713 in 3Q25, and in Taba Heights to EGP2,683, from EGP1,687. We expect the segment to contribute to consolidated revenue an average of c22% over FY25–29e. Our estimates point to a 4-year CAGR of c26% for hospitality EBITDA. For the real estate segment, we expect revenue to grow at a 4-year CAGR of c23%, representing an average contribution of c60% to total revenue over FY25–29e. Our total real estate revenue recognition over our forecast period is EGP238bn, including EGP43.3bn from its deferred revenue balance and EGP195bn of new sales. We expect an average real estate GPM of c36% over FY25–29e. O West dominates new sales as we account for the entire project in our DCF valuation. Our estimates include collections of EGP208bn and CAPEX spending of EGP102bn for real estate operations over our forecast period. Our remaining c18% of revenue over our forecast period is from the company’s town management segment, while we account for no land sales. For the company’s debt level, we understand from management that it may increase debt to finance O West’s land liabilities. Our interest expense estimate is EGP9.73bn over FY25–29e; we expect lower interest rates to partially offset the increase in debt levels.” Mariam Elsaadany 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

 

HC: Oriental Weavers, normalization is ahead, despite oil tailwind,

Posted on by Marwa Nakhla
  • 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

For further information, please contact:

Research@hc-si.com

HC expects the MPC to cut the policy rates by 150 bps

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, HC Securities & Investment expects the CBE to cut the policy rates by 150 bps at its upcoming December 25, 2025 meeting.

Financials analyst and economist at HC, Heba Monir commented: “Egypt’s external position is showing resilience with: (1) net international reserves (NIR) increasing 0.29% m-o-m and c7% y-t-d to a record USD50.2bn in November; (2) Egyptian banks’ net foreign assets (NFA) position widening by c9% m-o-m and 4.34x y-t-d to USD22.7bn in October; (3) Egypt’s worker remittances increasing c26% y-o-y and c3% m-o-m in October to USD3.7bn, reflecting confidence in the FX liquidity in Egypt; (4) Egypt’s 1-year CDS declining remarkably to 138 bps from 379 bps at the beginning of the year; (5) and Suez Canal revenues increasing by c17% y-o-y to USD1.97bn in 5M25/26. All these factors had helped Egypt’s exchange rate to appreciate by c7% y-t-d against the USD. Domestically, the PMI index improved to 51.1 in November from 49.2 in October, the highest level since October 2020, on improved demand and reduced pressure on business costs. Consumer prices are cooling off, with an accumulated c11% m-o-m increase in 11M25, compared to a c22% accumulated m-o-m increase in 11M24; and we still see inflation following a downward trajectory thereafter. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 25.3% implies a positive real interest rate of 10.5% using our 12M inflation estimate of c11% (after deducting a 15% tax rate for European and U.S. investors), suggesting that Egypt’s Carry Trade remains attractive. Also, the recent drop in Egypt’s CDS would lower the required yield on treasuries by foreign investors, which is not yet reflected in the recent treasury auctions. Accordingly, given Egypt’s improved external position, the EGP’s appreciation, the high real interest rate, and the expected decline in inflation rates, we expect the MPC to cut policy rates by 150 bps at its upcoming 25 December meeting to stimulate private-sector growth.”

It is worth mentioning that, at its 20 November meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) maintained the benchmark overnight deposit and lending rates at 21.0% and 22.0%, respectively, after it reversed a total of 625 bps of a total 1,900 bps rate hikes since the CBE started its tightening policy in 2022. Egypt’s annual headline inflation decelerated to 12.3% in November from 12.5% in October, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices inched up 0.3% m-o-m in November, compared to 1.8% m-o-m increase in October. On the global front, on 10 December, the U.S. Federal Reserve lowered the target range for the federal funds rate by 0.25% to 3.50%-3.75% with total cuts of 175 bps after it hiked rates by 525 bps since it started tightening policy in 2022, and on 18 December the European Central Bank (ECB) maintained the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility at 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

About HC Securities & Investment

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP4bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

HC: Arabian Cement shows agility amid changing industry dynamics

Posted on by Marwa Nakhla

In a recent report, HC Brokerage shed the light on the cement industry in Egypt, specifically on Arabian Cement Company (ARCC) where it focused on the local industry switching dynamics and the company’s efforts to revamps its strategy to enhance financial resilience

  • Macroeconomic and industry developments call for disciplined pricing and tighter cost management

  • ARCC is positioned to meet CBAM export compliance while hedging cost risks, improving its fundamentals

Local industry switching dynamics: In 2025, Portland cement prices surged c80–85% above the 2024 average of EGP2,455/ton, supported by c14% y-o-y consumption growth in 10M25 to 44.2m tons and a c6% y-o-y decrease in exports to 15.9m tons, pushing sector utilization above c90% of licensed c76m-ton capacity. To contain prices, the Egyptian Competition Authority (ECA) in July 2025 permanently lifted local output quotas, while the Ministry of Trade and Industry ordered the restart of nine idled lines (seven due within a year, adding an average of c12.6m tons), halved license modification fees to EGP130/ton and offered two new cement licenses of 2m tons each. Despite partial normalization, cement prices remain supported by firm local demand, estimated at 53.7m tons in 2025e, and disciplined supply management, which optimizes the trade-off between capturing a higher domestic price premium, while meeting rising export demand, ensuring FX self-sufficiency, fuel-import flexibility, and reducing exposure to domestic and regulatory risks. We believe this pricing dynamics will be sustained, given the opportunity cost of allocating more sales domestically, which will be reflected in a local price premium, in our view. Moreover, we estimate that the cement sector has inelastic demand. Hence, a single producer cutting its price will enjoy a short-lived market share gain before competitors replicate the cut, lowering prices and distorting sector profitability. Accordingly, from a game-theory perspective and amid opaque cost structures and asymmetric supply behavior among market players, producers are better off aligning output with demand to preserve equilibrium and maintain visibility into their scheduled capex plans. However, other than demand, we expect prices to be more affected by improved cost dynamics and efficiencies, which would materialize gradually as ongoing capex in fuel diversification and operational optimization begins to yield results. While we view demand as broadly sustainable, its growth continues to lag capacity reactivation, reinforcing the need for strict cost discipline and efficiency-led competitiveness.

Local margins to normalize and exports to remain robust: Based on our analysis of macroeconomic and sector data, we estimate a potential minor price normalization at EGP3,600–3,620/ton in 2026e, on c1.0% y-o-y higher demand, factoring in expected higher costs, including the effect of higher diesel and gasoline prices, electricity price adjustments, FX volatility, and coal and petcoke forward price trend being in mild contango. We expect local cement demand to grow at a c2.2% CAGR over 2025–30e, averaging c53m tons, supported by inflation moderation, monetary easing, streamlined private building permits (despite some talks of lags at the governorates’ level and a noticed slowdown in real estate secondary market turnover), the execution of project backlogs, the government’s efforts to boost private investment, industrial expansion, and attract FDIs. We expect sector margins to normalize gradually over the medium term, particularly given its delayed cost pass-through cycle, which has historically constrained timely repricing in response to cost shocks or regulatory changes. In our view, a stable and transparent industry regulatory environment is essential to reduce uncertainty and the need to maintain margin buffers. As for clinker and cement exports, in 2024, they reached 19.5m tons, with a mix of c38% cement and c62% clinker. In 10M25, export volumes declined c6% y-o-y to 15.9 tons, with the mix shifting to c59% cement and c41% clinker, driven by stronger demand from neighboring countries, especially for reconstruction, and growing opportunities in the EU and the US. Hence, we estimate that imposing a 30% export cap per company, as hinted at by the government, could lead to foregone export volumes among larger exporters, unless these volumes are absorbed by producers with lower export shares or later supported by additional capacity coming online or being reactivated. Looking ahead, optimizing logistics, maintaining cost efficiency, focusing on specialty and higher-margin products, and complying with the Carbon Border Adjustment Mechanism (CBAM) are key to boosting exports.

ARCC revamps strategy to enhance financial resilience: According to company data and its CEO’s interview with International Cement Review, ARCC is on track to achieve a new milestone in cost and export competitiveness through a planned multi-phase program that extends to 2030 to raise reliance and quality of alternative fuels (AF), including expanding the capacity of AF injection in both clinker lines, and investing in AF shredding facilities to reduce cost dependence on third-party suppliers. It began commissioning its hydrogen injection project, targeting a thermal substitution rate (TSR) of c55% by 2031. This project will enable ARCC to increase combustion efficiency, reducing the energy needed per ton of clinker, allowing an increase in AF use, achieving c8-9% savings in petcoke use, and cutting CO2 emissions by c130,000 tpa. The project payback period is 2–3 years, after which we expect gradual cost efficiency as production costs per Kg of hydrogen decrease over time and as potential longer-term scalability of hydrogen use shifts from a catalyst to a fuel input. ARCC increased its reliance on renewable energy, with its 24 MWh solar projects already covering c11% of its current power needs. Additional planned projects include waste heat recovery (WHR) and a cement mill optimizer to lower overall electricity consumption. Moreover, ARCC aims to advance the use of supplementary cementitious materials (SCMs) to reduce the clinker ratio in cement, using alternative raw materials to minimize limestone, planning to produce low-carbon calcined clay clinker and CEM III cement (with 50% ground granulated blast-furnace slag) upon completing a new cement silo project, and using AI technologies to optimize processes. These combined projects will enable the company to cut its CO2 emissions from production to 2.3m tons by 2031, down from 3.4m tons in 2023. We believe this decarbonization roadmap will strengthen ARCC’s operational and financial performances and largely hedge against margin vulnerabilities from rising costs and global competition. The company exports high-quality clinker to the EU and cement to neighboring countries, among others. Over 2025e–30e, we estimate ARCC total sales volumes to average 4.9m tons, with an export ratio averaging c42%. Revenue to grow by a CAGR of c3%, recording average EBITDA margin of c32% and net profit margin of c22%, normalizing to c27% and c19% by 2030e, respectively. By early 2026, final CBAM benchmarks are due, clarifying carbon cost exposure for EU importers. As ETS allowances phase out and demand shifts toward lower-carbon cement, we expect carbon costs to increasingly be passed through into pricing. Efficient producers are positioned to gain share and pricing power. According to our preliminary analysis of the CBAM rollout, we estimate ARCC could capture an average netback premium of EUR5.4/ton on exports to the EU, boosting margins by an average of c1.8% in 2026-30e. This estimate is based on available data, our assumptions and calculations, and remains subject to adjustment and refinement once actual benchmarks are finalized, released, and implemented, and as the actual weekly average auction price of EU ETS allowances evolves.

 

HC: The CBE could maintain rates at its upcoming meeting

Posted on by Marwa Nakhla

HC comments: ” Egypt’s external position is showing resilience with: (1) net international reserves (NIR) inched up c1% m-o-m with a c6% y-t-d increase to a record USD50.1bn in October; (2) Egyptian banks’ net foreign assets (NFA) position widening significantly by c16% m-o-m and 3.98x y-t-d to USD20.8bn in September; (3) Egypt’s worker remittances increasing c35% y-o-y in August to USD3.5bn, while declining c8% m-o-m, reflecting confidence in the FX liquidity in Egypt; (4) Egypt’s 1-year CDS declining remarkably to 176 bps from 379 bps at the beginning of the year; (5) and Suez Canal revenues starting to recover in November following the Gasa ceasefire. All these factors had helped Egypt’s exchange rate to appreciate by c8% y-t-d against the USD.”

” Domestically, the PMI index rose to 49.2 in October from 48.8 in September, on improved demand; however, still below the 50 benchmark. Consumer prices are cooling off, with an accumulated m-o-m increase of c11% in 10M25, compared to c22% accumulated m-o-m increases in 10M24, although we see inflation accelerating in November by 13.0% y-o-y and 0.9% m-o-m, due to the second round effects of the 17th October energy price hikes; however, we still see inflation following a downward trajectory thereafter. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 25.49% implies a positive real interest rate of 10.7% using our 12M inflation estimate of c11% (after deducting a 15% tax rate for European and US investors), suggesting that Egypt’s Carry Trade remains attractive. Meanwhile, the recent drop in Egypt’s CDS would lower the required yield on treasuries by foreign investors, which is not yet reflected in the recent treasury auctions, in our view. Although the CBE could maintain rates at its upcoming meeting, we believe that there is room for a 100 bps cut to stimulate the economy and the private sector, due to the parameters mentioned above and our view on inflation.”

HC expects the CBE to maintain policy rates at its upcoming 2 October meeting,

Posted on by Marwa Nakhla

HC expects the MPC to maintain policy rates at its upcoming 2 October meeting, giving the economy enough time to fully absorb the 200 bps rate cut that occurred on 28 August and given the expected inflationary impact of the USD1.00/mmbtu increase in natural gas price to the industrial sector announced yesterday and the expected increase in gasoline and diesel prices that will be announced in October.

 

Financials analyst and economist at HC, Heba Monir commented ” For the external position, we would like to pinpoint that Egypt’s FX liquidity showed a noticeable improvement with: (1) Egyptian banks’ net foreign assets (NFA) position widening significantly by c24% m-o-m and 3.54x y-t-d to USD18.5bn in July; (2) Egypt’s worker remittances increasing c6% m-o-m and c19% y-t-d in July to USD3.8bn, reflecting confidence in the FX liquidity in Egypt; (3) the c5% EGP appreciation y-t-d to EGP48.2/USD, (4) Egypt’s 1-year CDS retreating to 284 bps from 379 bps at the beginning of the year, and (5) net International Reserves (NIR) remaining almost unchanged m-o-m with a c5% y-t-d increase to USD49.3bn in August. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 25.74% implies a positive real interest rate of 8.15% using our 12M inflation estimate of 13.7% (after deducting a 15% tax rate for European and US investors), suggesting that Egypt’s Carry Trade remains attractive. Meanwhile, the Fed’s rate cuts and the recent drop in Egypt’s CDS would lower the required yield on treasuries by foreign investors, which is not yet reflected in the recent treasuries auctions.”