Prime Transaction: "Profits up for TTS and Simtel in Q4; historical annual result for Antibiotics"

Cargo shipper Transport Trade Services (TTS) and engineering and technology company Simtel Team, listed on the AeRO Market, continued the trend of increasing profitability in the fourth quarter of 2023, but at a lower level than in the first part of the year, shows in the latest analysis report of the https://www.primet.ro/Prime Transaction brokerage house.

Holde Agri Invest (HAI) underperformed due to the price of agricultural products, Roca Industry narrowed its quarterly loss but remained with a very large annual loss, Romcarbon (ROCE) was hit by lower revenues and IHunt Technology Import-Export of stocks of 3G devices that had to sell accelerated. Antibiotice (ATB) and Arctic Stream (AST) also had weak results in the fourth quarter, but these issuers are coming off nine very good months, according to the report in the attached document.

• Purcari - good operating results, but large decline in net profit due to a base effect

The results of Purcari Wineries in the last quarter of the year were apparently weak, but the reason is solely due to a significant non-recurring income recorded in the similar period last year, say those at Prime. On the other hand, the operating result had even a better evolution than in the first nine months of the year. This was helped by the increase in revenues, but especially by the favorable evolution of operating expenses.

Revenues from core activities increased by 13.84% to 116.93 million lei in the fourth quarter of 2023. The increase came entirely from wine sales, the most important for the group, which rose by 23.77% or 19.01 million lei. The other categories of products and services had quarterly revenue declines. Operating expenses had a favorable evolution, decreasing by 806 million lei compared to the similar quarter of the previous year.

The biggest decreases in expenses were those of other operating expenses, by 3.61 million lei, from a net expense of 1.87 million lei in the fourth quarter of 2022 to a net income of 1.74 million lei. Net profit fell by less than half, to 15.82 million lei in the fourth quarter of 2023 (-53.51%), after having increased by 23.73% in the first nine months. For the whole year it decreased by 14.15%, up to 59.58 million lei in 2023.

According to Prime, given that the decrease, both quarterly and annually, comes from a non-recurring element, it cannot be said that the results are poor. "The latest events in Transnistria once again brought into discussion the risks given by the geographical positioning of the main production capacities of Purcari Wineries. At the moment, the main working option is that the situation will remain the same, but it can change depending on the evolution on the front in Ukraine. A possible defeat of the neighboring country in the war with Russia (which at the moment, however, has a probability of less than 50%) would create a real danger that the Republic of Moldova will become the next victim, with serious consequences for the business in this country" , says the Prime report.

• TTS - the company remained on the growth trend, with improved profit margins

Transport Trade Services did not register the same growth rates as in the first part of the year, but maintained a positive trend even with the disappearance of the base effect compared to the previous year, according to the report. The group's quarterly revenues increased by only 6.71%, to 288.2 million lei in the fourth quarter of 2023, a growth rate much lower than that of the first nine months, when revenues appreciated by 31.4 %.

"It is a normal evolution, which starts from the stabilization of the logistics flows on the Danube and from the port of Constanţa in the context of the war in Ukraine", say those from Prime. The net profit increased by 29.74%, to 55.01 million lei in the fourth quarter of last year, a better evolution than that of the operating profit. For the whole year, the profit increased by 70.79%, up to 305.47 million lei in 2023, a new maximum for the period for which we have available data.

"In 2024 it is hard to believe that the pace of growth could be maintained, but for now we do not expect any reversal of direction. First of all because the situation that led to these results is maintained, and secondly because in 2023 investments were made that should have an effect and bring additional income", the Prime report states.

• Antibiotice - quarterly profit down due to higher expenses, but annual profit double previous all-time high

For Antibiotice, the end of 2023 was no longer as good as its first part, the increase in several categories of operating expenses leading to a quarterly profit loss. Revenues continued their positive trend, increasing by 13.37% to 137.35 million lei in the fourth quarter of 2023. In the first nine months, the percentage increase in revenue from customer contracts was more than double, 27.82%. Most of the revenue was generated by prescription drugs, with independent pharmacies and small chain pharmacies being the most important outlets nationally.

"Considering that sales are mainly maintained in the area of prescription drugs, we can conclude that the results are mainly the effect of a favorable market context, largely determined by higher prices. According to information provided by the company in preliminary reports, the value growth of the prescription drug segment was 20.7% in 2023, against a quantitative growth of only 6.7%, a trend that was also manifested in the market as a whole ", say those from Prime.

The decreasing financial loss and the shift of the profit tax from a net expense to a net income caused the net result to have a smaller decrease than the operating result, -56.15%, to 3.96 million lei in the quarter of fourth 2023. At the annual level, the net profit remained the same with a significant growth percentage of 109.52%, up to 80.69 million lei.

"Considering that the pharmaceutical market is under the "magnifying glass" of the State, it would be difficult for the current year to bring again price increases similar to those of 2023 for prescription drugs, especially since we are talking about an election year," I write those from Prime. "Until now, the historical maximum profit was the one recorded last year, and maintaining it in the current area would mean, practically, moving to another level for the company".

• Simtel - revenue and profit growth well below the level of the first nine months, but still at a good level

Simtel Team ended the year with increases in revenue and profit, but at a much weaker pace than in the first nine months, Prime writes. Consolidated quarterly turnover increased by 16.5%, up to 82.81 million lei in the fourth quarter of 2023, after having increased by 211.84% in the first nine months.

As in the previous year, the Green Energy business line, which focuses on the installation of photovoltaic panels, had a dominant position in revenues, its share increasing to 88.84% in 2023 (on individual data). The net profit increased by 19.55%, to 11.12 million lei, and for the whole year increased by 114.98%, to 27.43 million lei. The net margin in turn remained stable at 9.23% in 2023, compared to 9.12% in the previous year. "Considering the very high demand for photovoltaic panels and the efforts of the European Union to abandon energy based on fossil fuels, Simtel has very good prospects in the near future.

There is the impediment given by the undersized distribution network, which could hinder the momentum of energy from renewable sources, but we expect that sooner or later it will be overcome by investments in the network, given the very high interest and public pressure", he said. shows in the report.

Romcarbon, BRK Financial Group, Arctic Stream, Life is Hard, Visual Fan, Holde Agri Invest, Roca Industry and iHunt Technology are other companies whose results were dissected by the Prime team in the latest report.