Logo Yazilim: strong tailwinds, solid execution (stays BUY)

Following Logo’s strong start to the year, with solid 1Q22 results (94% yoy revenue growth, 9% EBITDA and 4% NI beats vs. the consensus) and in light of the supportive regulatory changes in the Turkish e-fiscal solutions market (which will come into effect from July 2022-onwards) and considering the signs of accelerated enterprise digital transformation (post COVID-19) in Turkey and Romania (Logo’s key operating geographies), we have rolled over our valuation model and increased our earnings estimates. After its impressive 94%/108% top-line/EBITDA growth (in TRY terms) in 1Q22, we expect Logo to maintain its strong growth momentum throughout 2022/24E, accompanied by stable 32-34% EBITDA margins (and remain FCF generative). Following our model revisions, we now expect 47%/74% higher consolidated revenues and 39%/63% higher group EBITDA in TRY terms for 2022E/23E, which translates into c.69% higher 2022E/23E NI, on average. The main drivers of our significant forecast revisions are Logo’s strong repricing power (reflecting higher Turkish CPI), the recent e-fiscal regulations in Turkey, set to expand the addressable market and boost Logo’s PaaS revenues (Logo is the leading e-invoice integrator in Turkey), and the strong recovery of EAS demand and ICT spending in Romania (generating FX revenues for Logo). Together with our revised macro and TRY WACC assumptions, our new 12-month PT is 49% higher, at TRY 71.1/share. We maintain our BUY rating on Logo’s shares and the stock remains among our few high-conviction picks in the BIST space, as an attractively-valued proxy for the enterprise digital transformation theme in the Turkish and Romanian EAS markets.