WOOD Flash – Vestel Beyaz: 2Q20 – in line with expectations, but bullish expectations could support share price
Yesterday (30 July), Vestel Beyaz (VESBE) reported its 2Q20 results, which were broadly in line with our expectations. The strong domestic demand and resilience of the Turkish market in 2Q, coupled with the faster-than-expected pace of recovery in Europe, are positive messages, in our view, but these were already highlighted by Arcelik a week ago and are most likely in the price already. However, we believe the upbeat messages on 3Q demand and the bullish management comments on guidance (barring a hit from a second wave of the virus on demand, VESBE could meet its original FY20E guidance of c.12% unit growth) could remain supporting factors for the sector’s share price performance in the near term. Following 1H20, we see upside potential for our numbers mostly on profitability as the 1H20 EBITDA margin was up by 160bps yoy, while we pencil in a 120bps contraction on a FY basis in our model. VESBE is trading close to our price target (PT) of TRY 26.6/share, while we rate the name a HOLD. On 2020E EV/EBITDA multiples, VESBE trades at 6.4x, implying a 5% discount vs. Arcelik (on reported EV/EBITDA), or a 13% discount (on organic EV/EBITDA).Vestel Beyaz Esya Sanayi ve Ticaret AS (Vestel Beyaz Esya) is a Turkey-based manufacturer of home appliances, including no-frost, double door, and single door, refrigerators; washing machines with different capacities; air conditioners; ovens with different functions, and dishwashers. The Company operates production facilities in Manisa and Turkey. The Company's marketing and sales activities are carried out by two other group companies, Vestel Dayanikli Tuketim Mallari Pazarlama AS and Vestel Dis Ticaret AS. Vestel Beyaz Esya is a subsidiary of Vestel Group. In January 2014, Vestel Elektronik Sanayi ve Ticaret AS, increased its stake in the Company to 92.6%.
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