MM Group - MTIE has just reported an unexpected surge in earnings for the first quarter of 2023. The company's management team and experienced professionals have been attributed to the stellar results, recording a net income of EGP 153 million, which represents an impressive 201% year-on-year increase from the EGP 51 million recorded in 1Q-2022.
The company has also reported higher net profit margins for 1Q-2023 at 6.18%, compared to 2.61% in 1Q-2022, thanks to effective cost management and operational efficiencies.
*Prices as of 5/6/2023 session 10:38 AM CLT
In a recent meeting with Mr. Ashraf El-Ghanam head of investors relations and buisness development, EGVEST gained insight into how MM Group - MTIE achieved their impressive financial results. According to El-Ghanam, their success is not a short-term fluke, but rather the result of a long-term plan that began in 2021 to keep their numbers above sea level, and turned thier product origin mix from 70% imported and 30% local produced and supplied to 20% imported and 80% local produced and supplied
One of the main strategies that contributed to the company's success was increasing their mobile inventory to +90 days by the end of 2021. This move was designed to hedge against any potential shortages in the supply of mobile devices, which is one of the company's three main business lines, along with cars, home appliances, and telecom services (Vodafone Branches and Pre-paid Cards distribution)
The company's well-managed inventory was also supported by the opening of Samsung's first mobile factory in Egypt by the second half of 2022. The local produced mobile devices provided a reliable local source of supply for the company, further cementing its position in the mobile devices market. (keep a note we will use it on the financials chapter)
MM Group - MTIE has seen strong performance in their home appliances business, which features popular brands such as Carrier air conditioners, Samsung, and Bosch. Carrier Ac, Samsung tv products are locally produced, giving MTIE the benefit of local production and protection against any shortages in imported supplies. Bosch products are locally supplied, MTIE operates as a local distributor and is not involved in the importing process.
This diversified product portfolio has helped the company maintain a healthy level of business in the home appliances sector and mitigate risks and take advantage of various market conditions.
During the first quarter of 2023, MM Group - MTIE's cars business was hit hard by foreign exchange rates and import limitations, with only 63 cars sold. This was a significant drop from the total of 260 cars sold during FY 2022, which itself was around 75% lower than the roughly 1,000 cars sold in 2021.
However, despite these challenges, the company's financials remain strong. According to Ashraf El-Ghanam, the company is now in a healthier position with no foreign exchange risks due to their 20% exposure to imported products. The working capital has also been effectively turned over into cash, with an average return of 18% net and a maturity period of 3 months, taking advantage of the change in T-bill rates.
MTIE's local product suppliers provide a credit period of 50 days on average, which gives the company the space to distribute and collect the required amounts within the cycle period.
The company's inventory level has been kept at a high level of around 50 days, down from the 90 days seen in 2021. This inventory provides an advantage for MTIE to maintain higher margins amidst fluctuating market prices and shortages of supplies from other market players. The company's dependency on the Egyptian pound and the gross period of payments are also working in their favor for better cash management, utilizing the high interest rates available.
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