OYAK General Manager Süleyman Savaş ERDEM: We ensured that the erroneous model in the analyst report was corrected through effective communication
Bank of America, which revised its recommendation and lowered its target price for Ereğli Demir Çelik Fabrikaları T.A.Ş. (EREGL) shares, corrected its report after statements from the management of Erdemir, one of OYAK Mining Metallurgy Companies. BofA amended its report by issuing a new one on Monday, March 4. BofA Securities, which raised the target price from TRY 19 to TRY 47, set its recommendation as 'neutral'. The report included the following statements:
“This report replaces the previous report dated February 29, 2024, which corrected an error in the assumed realized steel price, leading to incorrect calculations of estimated EBITDA and derived price target.
Results for FY23 show a turnover of TRY 147.9 billion, a +16% y/y increase, +3% vs BofAe, and -1% vs consensus. EBITDA TRY 15.2 billion, -44% y/y decrease, +19% vs BofAe, but -16% vs consensus. Steel production of 7.4 Mt, a -5% y/y decrease and -3% vs consensus. Model changes: 2024E EBITDA is up 49% to approximately TRY 40.4 billion on higher assumed steel prices (+21% to $ 797/t simple ASP) and weaker assumed TRY (28 to 36). Operational and financial leverage led us to raise our price target to TRY 47 (was TRY 19) on a raised target multiple (5.1x vs. 4.0). We are therefore upgrading to Neutral.
We believe the company has largely normalized after a challenging 2023. However, while we see a path towards deleveraging, we recognize uncertainties and risks for steel related to both domestic politics and global oversupply risks, hence it is Neutral. Shares are trading at about 4.9x 2024E EBITDA.”
OYAK: We acted with the principle of protecting our investors
Commenting on the matter, OYAK General Manager Süleyman Savaş ERDEM said, “We welcome Bank of America's correction of its recommendation and evaluation regarding the shares of Ereğli Demir ve Çelik Fabrikaları T.A.Ş. (EREGL). It was an appropriate decision for BofA to take our concerns seriously in this case, evaluate them, and rectify the model in the report.
Through effective communication, we clarified the situation to both the institution that prepared the report and the public, ensuring that the erroneous model in the analyst report was corrected. The mechanism based on the principle that our investors trust Erdemir, and Erdemir protects its investors worked, and the mistake was rectified.”
Experts noted that this was the first instance of a foreign investment organization correcting an analyst report and adjusting the price.
