Astra Industrial Group -Equity Report -03-06-2012

Reinforced by steel business

Astra Industrial Group (Astra), with investments in pharmaceuticals, chemicals and steel, caters to the growing economies in the MENA region. Deriving full advantage of the favorable market environment, the company occupies the market-leading position in the pharma and chemicals businesses in Saudi Arabia, which ensures healthy cash flows and stable growth. That said, Astra’s future growth will be significantly driven by its investment in Al Anmaa (the Iraqi steel business), which will not only boost up its top-line but also result in healthy margins due to availability of cheap feedstock in Iraq. We initiate coverage on the stock with an Overweight rating and a target price of SAR47.9.

Valuation and Conclusion: We like Astra?s emphasis on growth across all of its operating segments and believe the investment made in Al Anmaa will put the company on a new growth trajectory. We value Astra using a blend of long-run DEP forecasting (80% weight) and comparative multiple analysis (20%) to arrive at a target price of SAR47.9, which implies an upside of 18.3% from the current market price. We initiate coverage on Astra with an Overweight rating.