Turk Traktor - Offers Value Despite Newcomers
We reinitiate coverage of Turk Traktor with a BUY recommendation and target price of TRY99.50 per share, which offers 36% upside. Turk Traktor shares have underperformed the BIST 100 by 31% YTD on concerns over the profitability outlook and a shifting competitive landscape. This year has been challenging for Turk Traktor, as it compromised profitability to gain market share in 1H17. Yet ongoing robust tractor demand has enabled the company to partially pass on rising cost pressures stemming from the weak lira to its prices since 3Q17. We therefore expect the EBITDA margin recovery to continue in 2018. We also see a gradual pickup in global tractor demand, which should support the company's export sales over the medium term. At a 2018E EV/EBITDA of 8.0 and P/E of 10.4, the stock is trading at respective discounts of 34% and 44% to its peer group. We consider Turk Traktor to be an attractive value play at current levels.Turk Traktor Ve Ziraat Makineleri is engaged in the manufacturing of agricultural machinery, such as tractors, harvesting machinery and earth moving machinery, and its allied parts, including gearboxes, transmission boxes, engine blocks, cylinder heads and hydraulic lifters. Co. sells New Holland and Case IH branded vehicles and equipments. Co. exports its products to over 50 countries.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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