Aygaz: Still complicated, but worth it (upgraded to BUY)

We upgrade our recommendation on Aygaz to BUY from HOLD, with a new 12M price target (PT) of TRY 15.1/share (from TRY 14.0), implying 20% upside. Although the company is about to see difficult quarters ahead, and the 2020E net profit, as well as dividends, should be weak, due mainly to the effects of the COVID-19 pandemics, Aygaz is well-equipped to get through the crisis, in our view. This is thanks to the resilience of its core business, which has been performing quite well ytd, considering the circumstances, and solid results at the power unit Entek. The contribution from Tupras is likely to be negative this year, but we assume this is priced in already, and the refiner should bounce back into profit next year, on our numbers. To offset the stagnating core business in Turkey, in 2019, Aygaz announced plans to expand into Bangladesh. We welcome the news and believe the market has already started pricing this in. Once more information is provided by the company, hopefully soon, we believe there could be more upside for Aygaz, as it should be able to create value there, in our view. While we do not expect a generous dividend from this year’s profit, we see Aygaz returning to a double-digit dividend yield, on the current price, from its 2022E profit.