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BGC Partners: Tofas 1Q19 Earnings Review – slightly better than expected, 2019E domestic sales guidance revised up

Tofas reported 1Q19 net profit of TL325mn (flat, y/y), slightly higher than expectations. The reported net profit is 15-17% higher than our estimate and consensus. The positive surprise comes on the revenue side as export revenue includes higher take-or-pay components, in our view. That is also reflected onto the EBITDA as a higher margin than we predicted at 15.3% in 1Q19 vs. 11.6% in 1Q18. Higher than expected consumer financing income also contributed to the EBITDA margin. We are also pleasantly surprised by the 8.1% PBT margin in 1Q19 (vs. 7.2% in 1Q18). Tofas, also raised its domestic sales volume guidance up by c20k units to 60k-65k units now as the company gained remarkable market share at home in 1Q19, while leaving export guidance surprisingly unchanged. Based on 1Q19 actual exports, we would not have been surprised by a downward revision to export guidance but that may very well be because the actual level of exports do not matter given the guaranteed export volumes of 265k units under take-or-pay contracts. Current export guidance for 2019E is 200k-220k units. We maintain BUY rating on Tofas with a 12-mth TP of TL24.0/sh and we will go through our model with 1Q19 findings. The company will hold a conference call later today, the details of which are provided below.