Kalekim: secular growth story to remain intact

In this report, we revisit Kalekim’s investment case, after the devastating Kahramanmaraş earthquake, which hit 11 cities on 6 February. Although investors’ focus remains on the additional building materials demand related to the reconstruction activities, we argue that this should not be seen as the key theme of Kalekim’s investment case. We also believe that the recent earthquake will accelerate the undertaking of the urban regeneration projects, especially in Istanbul, given the earthquake risks. On top of the existing secular housing demand, the urban regeneration projects should result in strong multi-year demand for Kalekim’s products. Hence, our investment case for the company has not changed and we see it as a solid growth play, with a strongly cash-generative business model and an unlevered balance sheet. In our revised estimates, we estimate 71% yoy growth in revenues and 64% yoy growth in EBITDA, prompting an EBITDA margin of 20.3% in 2023E. We believe that Kalekim can deliver a 34% CAGR in revenues and record an average EBITDA margin of 19.5% between 2024-26E. Based on our revised estimates, Kalekim trades at a deep discount to its global peers, on our 2023-24E EV/EBITDAs and P/Es. Our revised estimates indicate a potential fair valuation range of TRY 59.7-122.3 (TRY 29.2-44.9 previously) vs. the current price of TRY 60.70.