Arcelik: Tough prospects (downgraded to SELL)
We have downgraded Arcelik to SELL (from Buy), with a new price target (PT) of TRY 15.9/share. The current crisis hit the business hard and production output is at c.60% of the pre-crisis levels. We expect the negative demand momentum to continue in the near term as consumers are likely to postpone large ticket purchases, coupled with currency-driven price adjustments in some markets. This, in our view, is likely to result in a revenue growth slowdown from 20+% in the past three years to an 8% CAGR in 2020-22E. We expect the 2020E EBITDA margin to be flat, but driven by one-off benefits, while we calculate a c.8% boost in EBITDA from one-offs in 2020E and the organic margin to be down by 80bps yoy. Also, as liquidity remains one of management’s key priorities, we believe that its no dividend payout policy is likely to continue. That said, our organic 2020E EV/EBITDA multiple of 6.0x is flat yoy vs. 2019 and not justified in light of the company’s weaker growth profile and lower margins, in our view.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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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