Domestic demand shows signs of slowdown… There has been a noticeable negative noise about the auto demand over the past few weeks. Second hand sales (light vehicles) dropped by 17% y/y in June, while availability of supply has improved based on anecdotal evidence. The rise in borrowing costs, coupled with limited credit availability, and deterioration in affordability of car purchases have constrained the demand. Following 63% y/y growth during the first 7 months of the year, we project the lig...
Removing Tofas from our model portfolio: Tofaş has outperformed BIST-100 by 54% and returned 35% in absolute terms since its inclusion to our model portfolio on December 29th, 2022. Following the strong outperformance and the weaker than expected 1Q23 financials results that were announced yesterday, we remove the stock from our model portfolio. That said, we continue to like Tofas and maintain our Buy rating on the stock with a TP of TL302/s. Our positive view rest on: 1) We think that the mer...
We incorporate the Stellantis Turkey acquisition and the new contract award, along with our new macro assumptions, into our model and raise our TP from TL212/s to TL302/s, while maintaining our Buy recommendation. The agreement has removed the long-standing uncertainties about Tofas’ future. We expect the merger to be value-accretive, as Tofas’ exposure to the high margin domestic market will increase substantially and the deal implies further contract awards in the coming years. The stock is tr...
Including Tofas to our model portfolio: We include Tofas into our model portfolio. The market is currently focused on Stellantis’ potential decision to award new contracts to Tofas, which may be announced soon. However, we think that a potential acquisition of Stellantis’’ Turkey operations by Tofas to maximize synergies (as stated by Stellantis CEO) is an underappreciated development that could be a more important catalyst for Tofas shares. We expect the merger to be value- accretive, as Tofas’...
Domestic demand to remain strong in 2023… Auto demand in the Turkish market is likely to remain strong in 2023 as i) microchip and raw material shortages that limited the availability of cars supplied to the market have shifted part of unfulfilled auto demand into 2023; ii) The government’s extremely low interest rate policy led not only to attractive borrowing costs, but also made car purchases one of the few investment opportunities in the economy to protect consumers’ saving against the ongoi...
Excluding Tofaş from our top picks: We are removing Tofaş from our top picks, as we think that Stellantis Group’s decision to produce New Fiat Doblo in Stellantis factory in Spain creates uncertainties and limits the visibility on Tofas’ future. As Doblo production is moved to Spain, Stellantis may decide to award new models to Tofas, as Tofas is one of the most efficient plants of the Stellantis Group. However, given the uncertainties and risks on new project awards, visibility appears low and ...
TOFAS TURK OTOMOBIL (TR), a company active in Automobiles, reduces its risk exposure and improves its general evaluation despite the loss of a fundamental star(s). The independent financial analyst theScreener has removed a fundamental star(s) of the title, which now shows 2 out of 4 stars; conversely, its market risk is now considered lower and can be described as defensive. Despite the loss of a star, theScreener upgrades the general evaluation of the title to Slightly Positive. As of the anal...
Automotive Sales in January •According to Automotive Distributors’ Association (ODD) data, auto market contracted by 13% y/y to 38,131 units in January 2022. (January 2021: 43,728) While the passenger cars sales were 29,020 units (down by 18% y/y), LCV sales increased to 9,111 units (up by 9% y/y). •TOASO’s sales increased by 33% y/y to 7,033 units. TOASO’s PC sales were up by 22% y/y, and its LCV sales increased by 56% y/y. TOASO’s market share contracted to 18.4% in January compared to 18...
YoY to 57,141 units in September 2021 (September 2020: 90,619). Passenger cars declined by 39% YoY, and LCV sales declined by 29% YoY. ØTOASOs sales declined by 41% YoY to 10,537 units. TOASOs PC sales were down by 49% YoY, and its LCV sales were down by 23% YoY. TOASOs market share were down to 18% in September, compared to 20% in August. ØFROTOs sales declined by 57% YoY to 4,695 units. FROTOs PC sales were down by 78% YoY, and its LCV sales were down by 50% YoY. FROTOs market share were down...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
Tofas’s 3Q20 net income surged by 71% y-y to TRY510m, in-line with our estimate of TRY505m, but slightly lower than RT consensus of TRY536m. We lower our 2020 and 2021 operating performance estimates but increase our net income estimates owing to lower effective tax rate. We increase our Rfr assumption by 100bp and revise our DCF based TP to TRY38 from TRY40. Tofas’ strong market share in Turkey, where demand conditions are still strong, coupled with its EUR denominated export revenue, provi...
Light vehicle sales soared 90% y-y to c27K in January-20. Passenger car sales more than doubled y-y, while light commercial vehicle sales increased by 55% y-y in January. We think a low base y-y, decline in interest rates, delayed delivery of the models that were out of stock in December-19 were the three major reasons for the strong y-y auto sales growth in January. January has the lowest seasonality in auto sales in Turkey. Nevertheless, we regard the strong demand in January as a good start ...
Light vehicle (LV) sales in Turkey increased by 16% y-y to 90.5K in December 2019, bringing YTD contraction to 23% in 2019. Local producers’ share in total sales increased significantly in December, thanks to 1) trading down in fleet sales, 2) faster supply capability of local producers amid conditions of volatile demand, 3) state banks’ attractive funding campaigns for locally produced cars and 4) depreciation of TRY. We regard December 2019 sales data as positive for TOASO and FROTO but sligh...
Market entering into a multi-year high growth period: Following a cumulative contraction of 49% in 2018 and 2019, the Turkish market appears to be entering a multi-year high growth period (estimates of 26% in 2020, 21% in 2021) on the back of low borrowing costs, pent up demand, and relatively stable auto prices. Lack of tax breaks and scrap incentives (as in 2019) will be a headwind in 2020; but, improvement in availability of models from some market players (lack of availability deterred marke...
Local share in total sales improves in November Light vehicle (LV) sales remained unchanged (y-y) at 58K in November, bringing the ytd contraction to 28% in 11M19. Despite the demand dynamics improving in Turkey, many auto companies have run out of stock in several models, which curbed total sales volume growth in November. However, the local producers’ share in total sales increased to 38% in November compared to 32% in October (33.6% in November 2018). We consider the November data-set to be...
Light vehicle sales soared 128% y-y to 49,075 in October, bringing YTD contraction to 32% y-y in 10M19. Recovery in auto demand had started in September with easing interest rates, a slight recovery in consumer sentiment and favourable FX movements. In addition, the state banks’ auto loan campaigns for locally produced cars (started as of 01 October) boosted demand further in October. Few models were out of stock in October, due to accelerated demand. In our view, this is a good indicator for au...
Tofas posted TRY408m net income in 2Q19, better than RT consensus’s TRY384m estimate but in line with ours at TRY410m. The operating performance was broadly in line with our and RT consensus estimates. Net debt declined significantly to TRY1.9b in 2Q19, from TRY2.9b in 1Q19, due to a massive improvement in working capital. We maintain BUY on TOASO.
We expect the positive momentum to continue: Global growth fears, which have pushed down global bond yields, and the recent shift to a more dovish stance by both the Federal Reserve and the European Central Bank, have led to a significant recovery in global equity indices since mid-May. This rising tide in the global markets has also lifted the Turkish equity market to a higher level. Despite the occasional volatility and challenges in the upcoming months, we expect this positive momentum in Tur...
Tofas posted TRY325m net income in 1Q19, better than our estimate of TRY266m and RT consensus of TRY277m. Better-than-expected operating performance backed by take-or-pay compensation and effective cost management were the main reasons for the upbeat results in 1Q19. Although Tofas recently cut shifts at its production facility (from 3 to 2), the company increased 2019 production guidance. We expect upbeat 1Q19 results and upward revision in 2019 guidance to underpin share price performance. We...
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