Arcelik (ARCLK TI) - Superior 3Q hints at a good 4Q: Maintain Buy
Arcelik posted TRY1b net income in 3Q20, beating RT consensus of TRY742m and our estimate of TRY749m by a wide margin. Operating profitability was much better than our estimate in 3Q20, boosted by full capacity utilization, favourable FX trends, low raw material (RM) prices, strict opex control and operational leverage.
Arcelik expects strong demand conditions to continue in 4Q20. A weak TRY should continue to underpin export revenues in TRY terms, in our view. On the profitability side, we think longer-term contracts should protect the gross profit margin from increasing RM prices. Thus, we expect Arcelik to post another good set of numbers in 4Q. Accordingly, we increase our 2020 top-line, EBITDA and net income estimates by 9%, 20% and 53%, respectively.
We increase our DCF-based TP by 26% to TRY36.5 to factor in the upward revision in our estimates. We reiterate BUY on Arcelik on the back of strong demand conditions in Turkey, tailwinds of FX movements and low RM costs.
Arcelik is engaged in the commercial and industrial activities in respect of the production, sales and marketing, customer services after sales, exportation and importation of consumer durable goods and consumer electronics. Co. has two segments: white goods reportable segment, which comprises washing machines, dryers, dish washers, refrigerators, ovens, cookers and the services provided for these products; and the consumer goods reportable segment, which comprises televisions primarily with flat screens, computers, cash registers, other electronic devices and the services provided to consumers for these products.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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