Turkey Wake up call: Macro, Political and Equity News, 4th June

This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.

Wake – up call

BIST added 0.94% yesterday in its 11th consecutive day of winnings that led to a 10.00% cumulative gain. Activity was mostly confined to a 600-point range in the positive territory during the session and the close was near the index's daily high. Banks fared relatively better with the 1.33% in their sector index as heavyweights GARAN and AKBNK outperformed. BIMAS, AEFES, ENJSA, TKFEN, FROTO, KCHOL, KORDS, and AKGRT topped the non-bank gainers while EKGYO, ASELS, TUPRS, GUBRF, CIMSA, and Koza Group names stood out among rare decliners. Coming to this morning, our local macro agenda showcases Central Bank's May'20 real effective FX rate due at 2:30PM local time. The CPI-based index is expected to stage some rebound from its 19-month low of 68.88 mark for previous month given ~2.3% appreciation of lira vs the currency basket as well as the 1.36% headline CPI print for May. Separately, BRSA will release banking industry aggregates for April'20 at 2PM local time. Cumulative industry profits stood at TL3.65bn in April'19 and at TL0.22bn in March'20. BIST is headed for another positive start as the upbeat sentiment abroad prevails while the slight weakness in lira (USDTRY noa at 6.7570 vs 6.7334 at yesterday's closing bell) may create some headwinds. U.S. futures are down 0.15% in early trades in partial reversal of their 0.2-0.6% overnight gains after the hour we left while Asian equities are almost all trading higher, albeit at small percentages.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 4609... According to the Health Ministry, the number of deaths from coronavirus increased by 24 people yesterday and reached 4609. The total numbers of tested and infected people are 2.16mn and 166,422 respectively.

(=) President Erdogan to meet Sarraj today... President Erdogan will meet the head of the Presidential Council of Libya Sarraj today in Ankara.

(=/-) May CPI was above the consensus... Accordingly, CPI rose by 1.36% MoM in May, coming above the consensus of 0.83%. PPI for May came in at 1.54% MoM. Thus, YoY increase in CPI and PPI were 11.39% and 5.53%, respectively. The core CPI increased by 1.68% MoM, while the highest monthly increases were 6.85% in clothing and shoes and 3.30% in transportation among the 12 sub-items.

(=) Ongoing swap negotiations with several countries... Trade Minister Ruhsar Pekcan stated that the swap negotiations with China, South Korea, Malesia, India and Japan currently continue. Pekcan also underlined that there will be a major recovery in the economy starting from June.

Sector and Company News:

(=) TTRAK’s sales volume in May... According to the monthly sales and production report of the company, TTRAK’s total sales decreased by 31% YoY to 1,548 in May20 from 2,233 in May19. While domestic sales increased by 22% YoY, the sharp decline in export sales by 56% offset the domestic sales’ contribution in total. On the five months’ comparison, total sales inched up by 3% YoY by the contribution of 56% increase in domestic sales while the export sales declined by 29% YoY.

As for production; the total units produced declined by 12% in May20 to 1,721 from 1,963 in May19. However, in the first 5 months of the year, total production increased by 11% YoY to 9,456 comparing to last year’s first five month period production number which was 8,504 in 2019.


May-20 May-19 YoY 5M20 5M19 YoY
Domestic 893 730 22% 5,741 3,680 56%
Export 655 1,503 -56% 4,418 6,220 -29%
Total Sales (Unit) 1,548 2,233 -31% 10,159 9,900 3%

Production (Unit) 1,721 1,963 -12% 9,456 8,504 11%


(=) YATAS posted TL18mn net income in 1Q20, up by 28% YoY. YATAS’s net income in 1Q20 was also in-lime with our estimate of TL18mn but slightly lower than the consensus of TL20mn. The company managed to increase its revenues by 39% YoY to TL331mn but its EBITDA margin eroded by 2.7-pp YoY. The company’s net debt almost unchanged QoQ at TL186mn with 0.88x net debt to EBITDA.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 331 326 316 1% 238 39% 327 1%
EBITDA 49 59 78 -16% 42 18% 82 -40%
margin 14.9% 18.0% 24.8% -3.2 pps 17.5% -2.7 pps 25.1% -10.3 pps
Net profit 18 20 18 -8% 14 28% 19 -6%
margin 5.5% 6.0% 5.7% -0.5 pps 5.9% -0.5 pps 5.8% -0.4 pps
Net Debt/EBITDA (x) 0.88 1.30 -43 bps 0.90 -2 bps
EV/EBITDA 6.2 6.1 6.3
P/E 12.6 9.8 12.8
ROE (%) 22.2% 24.5% -2 pps 22.1% 0 pps
Net debt 186 209 -11% 183 1%
Working capital 216 179 21% 226 -5%
Δ in WC -10 38 -127% 15 -170%
CapEx 72 85 -15% -19 -477%
FCF to firm 126 84 50% 43 195%
Shareholders' Equity 406 321 27% 390 4%


DGKLB posted TL7mn net loss in 1Q20, compared to TL11mn net loss in 1Q19. While its revenues advanced by 32% and the company’s EBITDA margin expanded by 2.2-pp YoY to 11.7%, higher financial expenses as well as higher tax rate led to the loss in 1Q20.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 177 n.a n.a n.a 135 32% 160 11%
EBITDA 21 n.a n.a n.a 13 62% 11 96%
margin 11.7% n.a n.a n.a 9.6% 2.2 pps 6.6% 5.1 pps
Net profit -7 n.a n.a n.a -11 -30% -45 -83%
margin -4.2% n.a n.a n.a -7.9% 3.7 pps -28.0% 23.8 pps
Net Debt/EBITDA (x) 6.46 10.87 -441 bps 6.56 -10 bps
EV/EBITDA 13.8 19.0 13.1
P/E -8.9 -3.4 -6.8
ROE (%) 1283.0% -166.0% 1449 pps -544.3% 1827 pps
Net debt 490 391 25% 446 10%
Working capital 225 222 2% 229 -1%
Δ in WC -3 54 -106% 0 7420%
CapEx 10 17 -45% -9 -204%
FCF to firm 38 -20 -284% 9 335%
Shareholders' Equity -5 52 -109% 12 -140%