Otokar (OTKAR TI) - Healthy defence deliveries: Maintain Buy
Otokar reported in-line net income for 4Q19. Operationally, however, EBITDA came lower than our and RT consensus estimates. The operational deviation was on account of higher-than-expected operating expenses. We think that the higher-than-expected operating expenses are attributable to the marketing activities carried out to explore new markets. Despite the EBITDA miss, we believe that the company posted a healthy set of numbers for 4Q19 supported by strong armoured vehicle shipments.
Factoring in our updated macro forecasts and lower risk-free rate forecast of 13% (from 17%), we raise our 12M TP by c17% to TRY200.6. We believe that Otokar will further penetrate the global armoured vehicle market, backed by its technology know-how and expanded defence portfolio. As the company’s product mix tilts towards the defence segment, we expect cash generation to remain strong at least over the next four-year period. Our dividend yield forecast is at c7% from 2019 earnings.
Otokar Otomotive Ve Savunma Sanavi is engaged in the import, manufacture, assembly, sale and export of bodies, engines, and all other components of all kinds of land, sea and air defense vehicles, as well as security vehicles, commercial buses, trucks, minibuses, midibuses, panel vans, cross-country vehicles, etc. Co.'s primary focus is on the production of Land Rover 4x4 and minibuses.
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