Brisa: investing in expansion and sustainability (upgraded to BUY)
We have updated our forecasts for Brisa, to reflect its recently announced capacity expansion plans and EBRD loan agreement, as well our updated Turkish macro assumptions. We raise our 12M price target (PT) to TRY 104.9/share (+13% in USD terms) and upgrade our rating to BUY, with 19% upside. The new, green lit capex programme is positive in two respects as: 1) sales have been capacity restrained for over two years; and 2) it indicates that Brisa is comfortable with the mid-term demand outlook across its markets (an issue highlighted post the 2Q23 results). This project should both increase sales, especially on Brisa’s export markets, but also plant efficiency and the product range, including novel fuel-saving tyres. We conservatively assume a total 2022-26E volumes CAGR of 2.2%, but c.4% for export-orientated channels (and for Lassa exports, a CAGR of 6%). Compared to the original Aksaray project, moreover, the new programme is relatively light, we see the 2024-26E capex to sales at just over 9%, vs. c.23% in 2015-17. As such, we see little risk for the gearing or the dividend capacity.Brisa Bridgestone Sabanci Lastik Sanayi ve Ticaret is engaged in the manufacture and sale of vehicle tires for domestic and foreign brands.
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