WOOD Flash: Brisa: strong 2Q20 profits on rebounding domestic demand
Reflecting on our forecasts, which we finalised at the end of April, the company has again exceeded our expectations, thanks to a strong recovery in domestic demand, falling input prices and lower interest expenses. It has not given any formal FY20E guidance but, according to the CFO: 1) 2H20E should be better than 2H19E; 2) FY20E net profit should beat the 2019 level; 3) Brisa can maintain an 18% EBITDA margin for the full year; and 4) net debt to EBITDA should remain below 2x. At this stage, we would need to raise both our revenues and net profit numbers for 2020E, but looking at 2021-22E, when the situation should have normalised, we see the stock trading on EV/EBITDAs of 6.2x and 4.8x, respectively, fully in line with its peers. The stock has dropped from its recent highs and currently trades with c.8% upside to our PT of TRY 11.9/share. We like the management’s strong financial discipline, which has been typical of the last several years and, valuations notwithstanding, our BUY case remains intact, in our view.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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