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

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 lost 0.48% on Thursday, still ending the holiday-shortened week with a cumulative gain of 2.38%. After an uptick start, benchmark index mostly floated in slight positive territory until around 3PM when the selling pressure intensified. BIST100 slipped over 2k points in the next hour, all the way down to 99.5k, but managed to recover bulk of its losses until the close. Banks lost 1.09% on average with YKBNK and AKBNK marginally underperforming the peers. Aviation stocks led by PGSUS, TUPRS, ENJSA, KCHOL, automotive and cement stocks topped the non-financial gainers while retailers, EREGL, PETKM, pharma/sanitary products companies stood among the weak spots. Coming to this morning, our macro agenda showcases the April'20 inflation numbers due at 10AM local time. Bloomberg consensus CPI at +0.60%. Separately, April'20 PMI will also be announced at 10AM. The index had dropped 8.2% on a sequential basis from its two-year high of 52.4 in February to 48.1 in March as the impact of the coronavirus pandemic hurt the business conditions. This had been the first posting below the 50 no-change mark in three months as the pandemic had led to softening in production, new export orders, total new business, and purchasing activity. BIST seems headed for a negative open given the risk-off mood in global markets and losses in lira (USDTRY at 7.0188 now vs 6.9891 at Thursday's closing bell) along with EM peers. U.S. futures are down 0.7% in early trades on top of the 2.9-3.1% losses from the time we left on Thursday and Asian benchmarks are mostly trading in the red.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 3081... In its inflation report, the Turkish Central Bank revised down 2020E inflation forecast to 7.4% from the previous of 8.2% mainly due to the downward revision in the output gap and food inflation projections. The Governor Murat Uysal stated that monetary and fiscal measures will contribute to financial stability and post-pandemic recovery by supporting the potential output of the economy while he underlined that the recovery is expected to kick-off in 2H20. Regarding the swap line with IMF, the Governor Murat Uysal cited that there has been no swap negotiation with IMF.

(=) USD5.39bn foreign trade deficit in March... According to the data released by the TURKSTAT, the foreign trade deficit has been announced at USD5.39bn in March 2020. It came in in-line with the consensus of USD5.40 deficit. Exports were USD13.4bn while imports were USD18.81bn in March. Export / Import cover ratio dropped to 71.3% in March, from 83.1% a month ago. March data brough the first three month foreign trade deficit to USD12.9bn.

(=) Treasury Minister will host a conference call on Wednesday... Accordingly, the Treasury Minister Berat Albayrak will hold a conference call with global investors, following the recent economic developments and coronavirus outbreak. The call will be on Wednesday, at 4pm Istanbul time.

(-) Tourism revenues declined in 1Q20... According to TURKSTAT, the revenues generated in the tourism sector contracted by 11.4% YoY to USD4.1bn in 1Q20. Number of tourists also declined by 15% YoY to 5.6mn. Thus, revenues per tourist advanced by 4% YoY to USD727.

Sector and Company News:

(=) TUPRS temporarily halted its refining activities in its Izmir refinery until July 2020, Recall that Izmir refinery corresponds to 40% of its total capacity. However, TUPRS has already revised down its 2020E production and sales volumes on April 20th, thus we think that the refinery halt has been already priced in. Recall that due to the negative impacts of covid-19 pandemic on fuel products demand and product margins as well as declining oil prices, TUPRS management decided to revise down its 2020E guidance on April 20th. Accordingly, the company lowered its production and sales volume targets to 24mn/tons and 25mn/tons from 28mn/tons and 29mn/tons. On refining margins, TUPRS management reduced its 2020E guidance to USD3.0-4.0/bbl from USD4.5-5.5/bbl. For CAPEX, TUPRS expects to spend USD125mn for 2020E compared to the previous guidance of USD200mn. We deem that TUPRS’s guidance downward revision is neutral at this stage given the bleak outlook of oil and refining industry.

(=) EKGYO obtained a refinancing loan amounting TRY200mn.

OZKGY announced that the company decided to extend the rental payment deferral for its hotel and shopping mall tenants until the end of May 2020. On the other hand, the company continues the sale of its largest residential project Buyukyali and other real estate operations.

AKSGY announced the opening of its two shopping malls Akbati and Akasya in June 1, 2020 under severe public health precautions for Covid-19. The company also added that if Ministry of Health does not allow, a further date is subject to be announced. To remind, other than AKSGY; TRGYO, ISGYO, AGYO and AKMGY are some other REICs which have shopping malls in their asset portfolios.

(-) Foreign investors’ net outflow significantly increased… According to the CBRT data released on Thursday, during the week of 17-24 April, non-residents executed net outflow of USD150mn from equities and USD328mn from GDDOs. As of last week, non-residents’ y-t-d net total flow of securities has been USD-2.70bn from equities and USD-5.42bn from GDDOs.


Exhibit: Non-residents’ y-t-d net flow of securities (Weekly)



Source: CBRT weekly securities statistics


(=) BRSA weekly banking data… According to the weekly banking statistics released by BRSA, in the week of 17-24 April, total loans increased by 1.84% WoW by the significant loan expansion in commercial loans. Additionally, consumer loan expansion is evident in the second week in a row which indicates banks started to give loans to their individual clients at the same time.

NPL ratio continues its declining trend another week by 20 bps WoW from 5.05% to 4.95%. Differently from previous weeks, this time NPL ratio declined not only by the increase in loans, also decline in NPL amounts led this downward trend.

As for the total deposits, TRY40.0bn increase which indicated 1.36% elevation WoW, majority of this amount sourced by the commercial institutions’ deposits which is partially the result of loan expansion. Comparing to YoY figures, a substantial increase in total deposits is evident, up by 30%.

In regards to FX deposits of residents, the picture has become “outflow from real persons and inflow to corporates“ in the previous week. Real persons’ FX deposits declined by USD982.0mn while corporates increased their FX deposits by USD604.0mn which indicates -82 bps and +79 bps difference respectively.


(TL, mn) 24/04/2020 17/04/2020 27/03/2020 26/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Loans 3,061,867 3,006,476 2,871,259 2,563,572 2,646,894 1.84% 6.64% 19.44% 15.68%
Consumer Loans 521,804 514,641 509,952 404,137 467,381 1.39% 2.32% 29.12% 11.64%
Housing 210,879 211,083 211,000 184,295 199,268 -0.10% -0.06% 14.42% 5.83%
Vehicle 6,991 7,011 7,071 6,231 7,051 -0.28% -1.12% 12.20% -0.84%
GPL 303,933 296,547 291,881 213,610 261,062 2.49% 4.13% 42.28% 16.42%
Consumer Credit Cards 105,896 105,482 114,168 103,082 116,791 0.39% -7.25% 2.73% -9.33%
Commercial and Other Loans 2,434,167 2,386,353 2,247,138 2,056,353 2,062,722 2.00% 8.32% 18.37% 18.01%
Installment Commercial Loans and Corporate Credit Cards 524,364 499,835 466,482 425,458 434,411 4.91% 12.41% 23.25% 20.71%
SME Loans 734,129 702,036 658,212 637,909 611,735 4.57% 11.53% 15.08% 20.01%
Fx Indexed Loans 9,595 9,651 10,029 24,711 11,808 -0.57% -4.33% -61.17% -18.74%

(TL, mn) 24/04/2020 17/04/2020 27/03/2020 26/04/2019 03/01/2020 w/w m/m y/y y-t-d
Non Performing Loans 151,548 151,784 152,438 107,858 150,758 -0.16% -0.58% 40.51% 0.52%
Consumer Loans 13,214 13,279 13,533 12,591 13,355 -0.49% -2.36% 4.95% -1.06%
Housing 1,161 1,166 1,196 1,121 1,269 -0.48% -2.96% 3.57% -8.54%
Vehicle 172 173 181 230 201 -1.01% -5.06% -25.34% -14.57%
GPL 11,881 11,940 12,156 11,240 11,885 -0.49% -2.26% 5.70% -0.03%
Consumer Credit Cards 6,280 6,290 6,420 6,590 6,323 -0.17% -2.19% -4.71% -0.68%
Commercial and Other Loans 132,054 132,215 132,485 88,677 131,081 -0.12% -0.33% 48.92% 0.74%
NPL Ratio 4.95% 5.05% 5.31% 4.21% 5.70% -1.96% -6.77% 17.64% -13.10%

(TL, mn) 24/04/2020 17/04/2020 27/03/2020 26/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Deposits 2,984,037 2,944,000 2,770,329 2,291,926 2,567,331 1.36% 7.71% 30.20% 16.23%
Natural Person 1,790,926 1,781,459 1,698,707 1,391,450 1,595,204 0.53% 5.43% 28.71% 12.27%
Demand 487,966 480,880 432,336 277,029 360,147 1.47% 12.87% 76.14% 35.49%
Time 1,302,961 1,300,579 1,266,371 1,114,421 1,235,056 0.18% 2.89% 16.92% 5.50%
Commercial Institutions 1,011,501 971,015 902,918 750,722 817,594 4.17% 12.03% 34.74% 23.72%
Demand 338,891 306,286 275,306 189,582 220,838 10.65% 23.10% 78.76% 53.46%
Time 672,610 664,729 627,611 561,140 596,757 1.19% 7.17% 19.86% 12.71%
Official and Other Institutions 181,609 191,526 168,704 149,755 154,533 -5.18% 7.65% 21.27% 17.52%
Demand 40,397 44,863 35,423 50,318 33,914 -9.95% 14.04% -19.72% 19.12%
Time 141,212 146,663 133,281 99,437 120,619 -3.72% 5.95% 42.01% 17.07%
Deposits Subject to Insurance 773,768 766,562 735,143 527,127 698,978 0.94% 5.25% 46.79% 10.70%


(USD, mn) 24/04/2020 17/04/2020 27/03/2020 26/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total FX Deposits of Residents 195,190 195,568 197,435 180,407 194,377 -0.19% -1.14% 8.19% 0.42%
Real Persons 118,513 119,495 120,516 108,311 121,166 -0.82% -1.66% 9.42% -2.19%
Corporates 76,677 76,073 76,919 72,097 73,211 0.79% -0.31% 6.35% 4.73%


(-) CBRT international reserves… According to the latest CBRT data released on Thursday, the Central Bank’s gross international reserves declined by 1.66% WoW from USD88.06bn to USD86.60bn. The decline in gross reserves has been 9.37% by monthly comparison. Net international reserves declined by 2.7% from USD25.9bn to USD25.2bn WoW. However, comparing to last month, the decline in net reserves has been 22.5% from around USD32.5bn to USD25.2bn.

As of April 24, CBRT gross international reserves declined by 18% and the net reserves declined by 38.4% y-t-d.


Exhibit : The change in gross and net international reserves of CBRT

CBRT International Reserves (USD,mn) 24/04/2020 17/04/2020 27/03/2020 26/04/2019 03/01/2020 w/w m/m y/y y-t-d
Net Reserves 25,230 25,932 32,552 25,858 40,985 -2.71% -22.49% -2.43% -38.44%
Gross Reserves 86,602 88,067 95,554 93,847 105,561 -1.66% -9.37% -7.72% -17.96%


Source: CBRT analytical balance sheet


Exhibit : The graph for gross and net international reserves of CBRT beginning from Jan-19




Source: CBRT analytical balance sheet


(=/+) YKBNK posted TRY1.129bn net income in 1Q20, 5.6% above consensus vs. parallel with Global estimate which was TRY1.14bn. The net income indicates 329% increase QoQ and 9% decline YoY. The bank’s strong net interest income of TRY3.97bn was mainly offset by increased coverage for all Stage I, II and III loans which led provision expenses move up by 19.4% YoY from TRY2.11bn to TRY2.52bn YoY. The improvement in commercial gains and the flattish fee income figures despite the regulations have been the contributors for 1Q20 bottom line.

YKBNK’s NIM improved by 20 bps QoQ led by higher CPI-linker gains and lower deposit costs which has been significantly down by 49% YoY. The bank’s loan growth has been 5% which was slightly below the private sector average of 6% vs. deposit growth has been around 12% much higher than than its private peers that was approximately 5%. This gave the bank a strong buffer to improve its LDR ratio declining from 103% in 1Q19 to 94% in 1Q20.

As for asset quality, NPL ratio increased by 10 bps mainly due to increase in coverage ratios for all Stage I, II and III to remain precautionary during the Covid-19 pandemic. The bank continues to have the highest coverage ratio among its peers which has been 0.6%, 15% and 66% respectively for Stage I, II and III loans. A significant decline in new NPL formation which was down by 86% QoQ gave the bank space to generate these high provisions. Higher coverages for loans and currency impact led the bank’s CoR increased by 83 bps and 62 bps respectively and exceed 300 bps.

The bank posted 16.6% of capital adequacy ratio (CAR) which is above the international and domestic requirements. Forbearance regulation of BRSA contributed 82 bps to bank’s CAR in 1Q20.

All told, YKBNK indicated a strong recovery in its 1Q20 performance with strong revenue generation and improved NPL formation. In the upcoming quarters in 2020, the main risks arise as lower fees and commissions income, new NPL formations and elevation in CoR by the lower economic activity due to Covid-19 pandemic in the upcoming quarters.



TRYmn 1Q20 Actual Consensus Dev. from consensus 1Q19 YoY 4Q19 QoQ
Net Income 1,129 1,069 5.61% 1,241 -9.02% 263 329.28%
NIM (swap-adjusted) 3.70% 3.40% 0.30% 3.50% 0.20%
Loan Growth 6.00% 5.00% 1.00% 3.23% 2.77%
Securities Growth 10.00% 4.00% 6.00% -9.93% 19.93%
Deposit Growth 9.00% 8.00% 1.00% 5.61% 3.39%
LDR 94% 103.00% -9.00% 97% -3.00%
ROE 11.40% 13.30% -1.90% 9.80% 1.60%
ROA 1.10% 1.40% -0.30% 1.00% 0.10%
C/I 36.20% 34.9% 1.30% 37.50% -1.30%
NPL Ratio 7.30% 6.20% 1.10% 7.20% 0.10%
CoR 3.30% 2.19% 0.49% 4.46% -1.78%
Tier 1 Ratio 13.00% 12.10% 0.90% 13.70% -0.70%
CAR 16.60% 15.00% 1.60% 16.70% -0.10%
Net Interest Income 3,973 3,356 18.38% 3,723 6.72%
Fee Growth -4.00% 20.00% -24.00% -2.70% -1.30%
Fee Income 1,521 1,337 13.76% 1,512 0.60%


(=/-) TSKB posted TRY160mn net income 2.4% below consensus estimates and 5% below Global estimates. The deviation sourced by the bank’s increased NPL coverage which also the factor behind 14% lower net income YoY and 6.4% QoQ.

TSKB generated 9% increased interest income however, the 13% increase in interest expenses which mainly sourced from the “interest expenses on securities issued” segment offset this solid revenue generation as well as the increased NPL coverages. The bank’s NIM declined by 10 bps QoQ to 4.10%.

In regards of net fees and commissions income, the bank increased its commission revenue by 115% QoQ from TRY10.0mn to TRY22.0mn as a supporting factor for the bottom line.

Asset quality continues to be the main strength of the bank. The NPL ratio has been 3.4% in Q1 which is way below the deposit banks. On the other hand, TSKB indicated a solid OPEX management which is represented with 12.7% of cost-to-income ratio which is another plus for the bank with a small team.

As for the capital adequacy, TSKB continues to keep its strength, posted 17.50% which gives the bank a buffer for probable downturn of the economic activity due to Covid-19 pandemic.



TRYmn 4Q19 Actual Consensus Dev. from consensus 1Q19 YoY 4Q19 QoQ
Net Income 160 164 -2.44% 185 -13.51% 171 -6.43%
NIM (Non-adjusted) 4.10% 4.50% -0.40% 4.20% -0.10%
Loan Growth 9.60% 7.14% 2.46% 6.54% 3.06%
Securities Growth 8.57% 4.92% n.a 6.32% 2.25%
Deposit Growth n.a n.a n.a n.a n.a
LDR n.a n.a n.a n.a n.a
ROE 13.40% 14.80% -1.40% 13.50% -0.10%
ROA 1.40% 1.90% -0.50% 1.70% -0.30%
C/I 12.70% 11.1% 1.60% 13.40% -0.70%
NPL Ratio 3.40% 2.10% 1.30% 3.50% -0.10%
CoR 0.51% 0.47% 0.04% 1.26% -0.75%
Tier 1 Ratio 12.00% 10.70% 1.30% 12.40% -0.40%
CAR 17.50% 16.00% 1.50% 17.80% -0.30%
Net Interest Income 448 511 -12.33% 420.29 6.59%
Fee Income 22 8 168.75% 10 115.65%
Fee Growth 178.00% 65.00% 113.00% 46.00% 132.00%



(=) TKNSA posted TL31mn net loss in 1Q20 compared to TL52mn net loss in 1Q19 and TL19mn net loss in 4Q19. TKNSA’s revenues advanced by 25% YoY to TL1bn and the company managed to improve its EBITDA margin to 5.7% from 5.4% in 1Q19.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1,048 n.a n.a n.a 841 25% 1,257 -17%
EBITDA 60 n.a n.a n.a 45 33% 106 -43%
margin 5.7% n.a n.a n.a 5.4% 0.3 pps 8.4% -2.7 pps
Net profit -31 n.a n.a n.a -52 -41% -19 61%
margin -2.9% n.a n.a n.a -6.2% 3.3 pps -1.5% -1.4 pps
Net Debt/EBITDA (x) 1.9 0.3 165 bps 1.4 57 bps
EV/EBITDA 4.4 2.0 2.9
P/E -6.2 -2.6 -3.1
ROE (%) 45% 73% -28 pps 59% -14 pps
Net debt 630 50 1159% 426 48%
Working capital -68 -282 -76% -306 -78%
Δ in WC 238 -64 -474% -69 -445%
CapEx 33 30 7% -11 -396%
FCF to firm -138 153 -190% 161 -186%
Shareholders' Equity -282 -154 83% -252 12%


(+) RTALB subsidiary A1 Life Sciences Inc. signed an agreement.with one of the world's largest IVD manufacturers on the production of 500k + 1.5mn (optional) units of Diagnovital Sars-CoV-2 Real Time PCR kits.

(+) OTKAR posted TL22mn net profit in 1Q20, solid bottom-line compared to its net loss of TL11mn in 1Q19. OTKAR’s revenues grew by 9% YoY to TL459mn, in line with the consensus estimate of TL446mn. Its EBITDA jumped by 361% YoY to TL46mn slightly higher than consensus expectation of TL43mn. Higher sales volume of trucks and armoured vehicle are the main drivers of solid 1Q20 outlook.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 459 446 n.a 3% 419 9% 553 -17%
EBITDA 46 43 n.a 7% 10 361% 57 -20%
margin 10,0% 9,6% n.a 0,3 pps 2,4% 7,6 pps 10,4% -0,4 pps
Net profit 22 21 n.a 6% -11 -304% 54 -59%
margin 4,9% 4,7% n.a 0,2 pps -2,6% 7,5 pps 9,8% -4,9 pps
Net Debt/EBITDA (x) 2,1 3,4 -135 bps 1,3 72 bps
EV/EBITDA 8,5 14,0 10,2
P/E 7,8 13,9 10,9
ROE (%) 84% 61% 23 pps 55% 29 pps
Net debt 964 814 18% 579 67%
Working capital 1.572 1.522 3% 1.409 12%
Δ in WC 164 231 -29% -425 -138%
CapEx 49 30 65% 47 6%
FCF to firm -162 -244 -33% 438 -137%
Shareholders' Equity 459 298 54% 638 -28%


(+) ANACM posted TL116mn net income in 1Q20 up by 14% YoY, higher than the consensus estimate of TL88mn and our expectation of TL76mn. Its revenues of TL1,112mn (+43% YoY) and EBITDA of TL285mn (+46% YoY) are also 5% and 8% higher than the consensus expectation, respectively. In 1Q20, total glass packaging production was at 586k tons, up by 13% YoY as a result of new capacity introductions starting from 2Q19. While we see a strong 20% YoY domestic output, international output also grew by 6% YoY. CURs were 96% in Turkey plants and 100% in Russia plants. As a result, share of domestic and international production were 56% and 44%, respectively. Domestic sales volume grew by 36% YoY thanks to higher output coupled with the low base of 1Q19. International sales were also up by 15% YoY. ANACM remained resilient thanks to its wide range of product portfolio despite of the negative impact of Covid-19 pandemic in almost all industries. Increase in household type product consumption, stock piling due to curfews and stay home advices had supported food retailer industry, which is the end-market of ANACM. Profitability was also strong mainly thanks to price increase in domestic market, product mix and TL depreciation despite of significantly higher logistics expenses.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1.112 1.056 960 5% 775 43% 1.161 -4%
EBITDA 285 265 244 8% 195 46% 289 -1%
margin 25,6% 25,1% 25,4% 0,5 pps 25,2% 0,4 pps 24,9% 0,7 pps
Net profit 116 88 76 31% 102 14% 99 17%
margin 10,4% 8,4% 7,9% 2,1 pps 13,1% -2,7 pps 8,5% 1,9 pps
Net Debt/EBITDA (x) 2,1 2,8 -69 bps 2,5 -34 bps
EV/EBITDA 4,8 5,6 5,5
P/E 5,7 4,6 6,2
ROE (%) 20% 21% -1 pps 19% 1 pps
Net debt 2.489 2.309 8% 2.661 -6%
Working capital 1.244 783 59% 1.084 15%
Δ in WC 160 53 200% -111 -244%
CapEx 145 187 -22% 182 -20%
FCF to firm -47 -6 726% 215 -122%
Shareholders' Equity 2.696 2.339 15% 2.826 -5%


(=) FROTO is to announce its 1Q20 results today after market close. We expect TL9,513mn of revenues (+2% YoY), TL818mn of EBITDA (+5% YoY – 0.2pps improvement in margin) and TL491mn of net profit (+3% YoY). Consensus’ revenue, EBITDA and net profit expectations are TL9,210mn, TL800mn and TL504mn, respectively.

(-) TOASO extended its previous decision to halt production until May 11, 2020. Recall that the Company had decided to halt production for two weeks starting from April 3, 2020 and had extended it until May 4,2020 before.

(=/+) ARCLK sold its 100% share in Token Financial Technologies to KCHOL and Temel Ticaret ve Yatırım AS for TL312mn. Payments related to the disposal will be made on 8 May 2020.

(-) TRKCM posted TL161mn net income in 1Q20 up by 8% YoY, significantly higher than the consensus estimate of TL 115mn and our expectation of TL116mn, mainly on income from investing activities. Its revenues of TL1,519mn (-1% YoY) and EBITDA of TL212mn (-26% YoY) are 1% and 10% lower than consensus expectation, respectively. In 1Q20, total flat glass production was at 626k tons, up by 8% YoY (4Q19: 636k tons) after the termination of cold repair in Italy and Bulgaria. CUR reached to 81%. Total auto glass production volume in this period declined by 4% YoY. As a result, total sales volume contracted by 3% YoY in 1Q20. The share of domestic sales volume was at 52% up by 8pps y-o-y mainly driven by improved activity in construction and better project mix in automotive side. March was relatively weak compared to the first two months due to COVID-19 outbreak affecting the industry activity. On the other hand, exports volume from Turkey were down by 48% YoY due to; i) 1Q19’s high base due to slowdown in domestic market, ii) slowdown in economic activities in export regions and logistical hurdles due to COVID-19 outbreak. Last but not least; higher cost of raw material and change in finished goods, caused 1.4pps YoY contraction in gross profit margin. Generally, Turkey operations was satisfying (volume: +14% YoY, revenue: +10% YoY) due to sales volume generated from domestic architectural and auto-glass operations; nonetheless, revenue from Europe was under pressure (volume: -18% YoY, revenue: -16% YoY in TRY). Russia operations were also supportive (volume: +28% YoY, revenue: +20% YoY in TRY).

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1.519 1.532 1.446 -1% 1.534 -1% 1.754 -13%
EBITDA 212 235 219 -10% 288 -26% 266 -20%
margin 14,0% 15,3% 15,2% -1,4 pps 18,7% -4,8 pps 15,1% -1,2 pps
Net profit 161 115 116 40% 149 8% 259 -38%
margin 10,6% 7,5% 8,0% 3,1 pps 9,7% 0,9 pps 14,8% -4,2 pps
Net Debt/EBITDA (x) 2,8 1,8 104 bps 2,1 68 bps
EV/EBITDA 6,6 5,2 6,0
P/E 5,3 4,6 5,8
ROE (%) 12% 16% -4 pps 12% 0 pps
Net debt 2.985 2.180 37% 2.432 23%
Working capital 1.694 1.658 2% 1.387 22%
Δ in WC 307 187 64% -295 -204%
CapEx 95 88 7% 499 -81%
FCF to firm -218 -32 584% 155 -241%
Shareholders' Equity 6.409 5.541 16% 6.384 0%


(+) SODA posted TL403mn net income in 1Q20 up by 42% YoY, slightly above the consensus estimate of TL377mn and our estimate of TL378mn. Net sales increased by 24% YoY to TL1,176mn, which is also slightly higher than the consensus estimate of TL1,101mn and our expectation of TL1,106mn. SODA’s EBITDA improved significantly by 55% YoY to TL309mn, beating the consensus estimate (TL273mn) by 13% and our estimate (TL268mn) by 15%. Total soda ash production in 1Q20 was at 595k tons, up by 3% YoY. Chromium chemicals production was up by 16% YoY as there is a low base due to the equipment renewal investment in 1Q19. While soda ash sales volume increased by 5% YoY to 574k tons mainly derived by strong international demand, chromium chemicals volume increased by 5% YoY despite the weak outlook in China in the first quarter because of Covid-19 pandemic. Electricity sales was down by 2% YoY and Oxyvit Plant sales remained flat y-o-y. Fiberglass sales volume was 16k tons up by 75% QoQ. Also note that CUR reached to 68% vs. 45% seen in 1Q19, when the plant was first introduced.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 1.176 1.101 1.106 7% 948 24% 1.118 5%
EBITDA 309 273 268 13% 200 55% 300 3%
margin 26,3% 24,8% 24,2% 1,5 pps 21,1% 5,2 pps 26,8% -0,5 pps
Net profit 403 376 378 7% 285 42% 297 36%
margin 34,3% 34,2% 34,2% 0,1 pps 30,1% 4,2 pps 26,5% 7,7 pps
Net Debt/EBITDA (x) -0,5 -0,8 26 bps -0,6 4 bps
EV/EBITDA 4,7 6,9 5,5
P/E 4,8 4,7 5,6
ROE (%) 20% 33% -13 pps 19% 1 pps
Net debt -594 -769 -23% -581 2%
Working capital 1.138 820 39% 949 20%
Δ in WC 190 210 -10% 4 4344%
CapEx 29 94 -69% 70 -58%
FCF to firm -58 -133 -56% 171 -134%
Shareholders' Equity 6.019 4.852 24% 5.742 5%


(=/+) SISE posted TL442mn net income in 1Q20, down by 1% YoY, slightly lower than consensus estimate of TL460mn but in-line with our estimate of TL442mn. Revenues increased by 18% YoY in-line with the expectations. Strong performance of packaging group was the main contributor of solid revenue growth. The Company printed an EBITDA of TL987mn, up by 19% YoY, and higher than consensus expectation of TL912mn and our estimate of TL901mn. Better than expected profitability was driven by a relatively slower increase in main operating expenses especially in chemicals segment reflecting the impact of favourable currency conditions as +90% of its revenue is in hard currencies. Almost all segments showed revenue growth (flat glass: -1% YoY, chemicals: +21% YoY, packaging: +43% YoY, glassware: +8% YoY) mainly derived by slight increase in sales volume coupled with product mix and price adjustments/currency impacts. Despite slight contraction,0.4pps YoY, in gross profitability (flat glass’ negative contribution), EBITDA margin increased by 0.2pps YoY to 21.4%.

TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 4.615 4.507 4.421 2% 3.923 18% 4.843 -5%
EBITDA 987 912 901 8% 830 19% 1.008 -2%
margin 21,4% 20,2% 20,4% 1,2 pps 21,2% 0,2 pps 20,8% 0,6 pps
Net profit 442 460 442 -4% 448 -1% 546 -19%
margin 9,6% 10,2% 10,0% -0,6 pps 11,4% -1,9 pps 11,3% -1,7 pps
Net Debt/EBITDA (x) 1,9 1,5 45 bps 2,0 -1 bps
EV/EBITDA 4,7 5,2 5,0
P/E 5,7 5,6 6,2
ROE (%) 13% 18% -5 pps 13% 0 pps
Net debt 7.740 5.261 47% 7.477 4%
Working capital 6.024 5.254 15% 5.310 13%
Δ in WC 714 670 6% -436 -264%
CapEx 321 427 -25% 1.227 -74%
FCF to firm -282 -331 -15% 289 -197%
Shareholders' Equity 14.451 13.151 10% 14.623 -1%


(=) ULKER is to announce its 1Q20 results today after market close. We expect TL2,236mn of revenues (+15% YoY), TL376mn of EBITDA (+14% YoY – 0.2pps decline in margin) and TL199mn of net profit (-45% YoY). Consensus’ revenue, EBITDA and net profit expectations are TL2,299mn, TL389mn and TL177mn, respectively