reports
- Erdem Kaylı
TURKEY STEEL - Strong outlook prevails
We believe Turkish blast-furnace steelmakers are poised for stellar earnings growth in 2021, supported by favourable global steel sector outlook. Following the cut in steel production, owing to fall in demand as a result of Covid-19, steel supply is yet catch up with the pick-up in demand. We expect the supply-demand mismatch to continue over the near term, as we expect strong demand post Covid-19. While the current steel prices may be unsustainable with the normalisation in supply, we believe t...
- Akif Dasıran
Turkcell (TCELL TI) - Investments on the rise: Maintain Hold
Turkcell’s net income soared by 51% y-y to TRY1.2b, beating both RT consensus of TRY1.04b and our TRY975m estimate. EBITDA grew by 16% y-y to TRY3.4b, in-line with our estimate but better than RT consensus of TRY3.2b. Although the operating performance was in-line with our estimate, lower than expected impairment losses on financial and contract assets (TRY49m in 3Q20 vs our estimate of TRY150m) and lower than expected financial expenses boosted the bottom line. Higher operational capex pushed ...
- Akif Dasıran
Ulker Biskuvi Sanayi (ULKER TI) - Proven resilience: Maintain Buy
Ulker’s net income increased by 27% y-y to TRY323m in 3Q20, beating both our estimate of TRY249m and RT consensus of TRY239m. The operating performance, in terms of EBITDA growth and margin, was slightly better than our estimate while fair value increase of short-term financial assets further boosted the bottom-line beat. Following upbeat 3Q20 results, we maintain BUY on ULKER, on the back of its attractive valuation and resilient operations.
- Erdem Kaylı
TURKEY METALS & MINING - Operation performance healthy
Koza Gold posted net income of TRY584m in 3Q20, broadly in-line with our estimate of TRY561m and Research Turkey consensus of TRY620m. Operationally, 3Q20 EBITDA of TRY620m came in 15% higher than our estimate of TRY541m (vs RT consensus of TRY640m), driven by higher than expected average selling price (ASP). Average selling price was higher by 39% y-y to USD2,057/oz, while the average gold price stood at USD1,911/oz in 3Q20. We make minor changes to our TPs for Koza Gold and Koza Metal, based ...
- Erdem Kaylı
Kardemir (KRDMD TI) -Solid earnings momentum ahead: Upgrading to BUY
We raise our 12M TP to TRY7.91 (from TRY2.71 previously) and upgrade our rating to BUY from Hold, on the back of higher steelmaking margin forecasts and updated macro assumptions. In our view, the prospects for Kardemir are brighter given the solid long steel pricing, coupled with lower coking coal prices and controlled iron ore costs from high local procurements. We expect the continued decline in its FX open position to provide some cushion in the midst of TRY weakness. Kardemir reported net ...
- Erdem Kaylı
Enka Insaat (ENKAI TI) - Boosted by MTM gains: Maintain Buy
With this report, we incorporate our updated macro forecasts and our lower segmental estimates, owing to the adverse impact of the Covid-19 pandemic. Despite lowering operational forecasts in USD terms, we raise our 12M TP by 48% to TRY9.87, due to a weaker TRY as we value its operations using USD-based DCF models. We believe Enka offers one of the strongest alpha stories in the Turkish market, as most of its value creation generates hard currency. Net cash position as of 9M20-end is USD3.9b, eq...
- Erdem Kaylı
Petkim (PETKM TI) - Solid results in 3Q20: Maintain Hold
With this report, we incorporate higher polymer pricing but weaker aromatics pricing due to the Covid-19 pandemic. Together with our raised petrochemical pricing and weaker naphtha prices, we also factor in our updated macro forecasts, which new lower risk free rate assumption of 14% and weaker TRY against USD forecasts. As a result, we raise our 12M SOTP-based TP by 15% to TRY4.58. Even though we expect cash generation to remain healthy in the near term, we believe that the upside potential is ...
- Erdem Kaylı
Tupras (TUPRS TI) - Challenging outlook persists: Maintain Hold
Based on our updated macro assumptions (including 100bp higher risk-free rate of 14%) and higher indebtedness, we lower our 12M TP for Tupras by 2% to TRY82.65 and maintain our HOLD rating. We expect mediocre cash generation to continue in 4Q20 due to narrowed crude differentials and muted crack margins. Despite expecting a strong recovery by 2021, we find the upside potential to be unattractive, as the stock trades at 6.3x 2021E EV/EBITDA, implying a 39% premium to its European peers Tupras po...
- Erdem Kaylı
Otokar (OTKAR TI) - Brighter outlook with new order intakes: Maintain ...
Factoring in the recent order intakes and updated macro forecasts (risk-free rate assumption increased by 100bp to 14%), we raise our 12M TP by 33% to TRY221.8 per share, implying a 31% upside potential. We believe the improved outlook for commercial vehicles, along with the resilient defence segment operations, is indicative of strong growth in 2021. As a result, we expect our revised 2021 EBITDA and net income estimate to grow by 44% and 62%, respectively. We believe Otokar will penetrate furt...
- Erdem Kaylı
Aselsan (ASELS TI) - Upside potential limited: Maintain Hold
We raise our 12M TP by 35% to TRY18.35, due to TRY depreciation against the USD. This is despite the slower revenue recognition, owing to the disruption in the supply chain from Covid-19 and higher risk free rate assumption of 14% (previously 13%). We expect Aselsan's strong order backlog to have limited impact on its 2020 financials, due to the disruption in the supply chain from Covid-19. While we remain positive on the company’s long-term prospects, we believe that the current risk/reward pro...
- Akif Dasıran
Tofas Otomobil (TOASO TI) - Domestic demand resilient: Maintain Buy
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...
- Akif Dasıran
Arcelik (ARCLK TI) - Superior 3Q hints at a good 4Q: Maintain Buy
Arcelik posted TRY1b net income in 3Q20, beating RT consensus of TRY742m and our estimate of TRY749m by a wide margin. Operating profitability was much better than our estimate in 3Q20, boosted by full capacity utilization, favourable FX trends, low raw material (RM) prices, strict opex control and operational leverage. Arcelik expects strong demand conditions to continue in 4Q20. A weak TRY should continue to underpin export revenues in TRY terms, in our view. On the profitability side, we thi...
- Erdem Kaylı
Tekfen Holding (TKFEN TI) - Weak contracting outlook: Downgrading to H...
In this report, we incorporate our weak contracting outlook and updated macro view into our forecasts. Accordingly, we cut our 12M TP by 42% to TRY14.68 and downgrade our call to HOLD from Buy. Based on a significant decline in its net cash position and a muted contracting outlook, we think investor appetite for the stock would be limited. Tekfen reported a net loss of TRY15m in 3Q20, lower than BNPPe/RT consensus estimate of a profit of TRY18m/TRY189m. EBITDA (excl. profit from affiliates) of ...
- Erdem Kaylı
Erdemir (EREGL TI) - Boosted by lower raw material costs: Maintain Buy
Backed by updated macro and higher sales volume forecasts, we raise our 12M TP (based on weighted average of DCF and international peer multiples, assumptions unchanged) by 31% to TRY15.84. Supported by higher steel product prices, we expect steel making margins to remain healthy. We keep our positive stance on Erdemir as it offers an appealing risk/reward profile, given its strong balance sheet and hard currency dominated cash generation. Erdemir reported net profit of TRY582m in 3Q20, margina...
- Akif Dasıran
Turkcell (TCELL TI) - 2Q20 results in-line: Maintain Hold
Turkcell posted TRY852m net income in 2Q20, in-line with our estimate of TRY851m and RT consensus of TRY845m. From top to bottom, there were no surprises in 2Q20 results. Yet, challenges remain on ARPU growth outlook. We maintain HOLD, due to unattractive valuation.
- Erdem Kaylı
Tupras (TUPRS TI) - Better than expected profitability: Maintain Hold
As we incorporate our current refinery outlook and updated macro, we lower our 12M TP by 3% to TRY84.34 and maintain HOLD rating. We expect mediocre cash generation to prevail in 3Q20 due to narrowed crude differentials and muted crack margins. Despite expecting solid recovery by 2021, we find the upside potential to be unattractive, as the stock trades at 18.6x and 6.8x 2020/21E EV/EBITDA, implying 135/63% premium to its European peers. Tupras posted net loss of TRY185m in 2Q20, better than BN...
- Akif Dasıran
Arcelik (ARCLK TI) - Robust results hint to a better 2H20: Upgrading t...
Arcelik posted TRY407m net income in 2Q20, beating RT consensus of TRY358m and our estimate of TRY310m. Resilient results in 2Q20 hint to better results in 2H20, with strong demand in Turkey, on-going recovery in international markets and low raw material prices. Demand conditions are better in Turkey vs global average. However, ARCLK trades at 39% discount to international peers on 2021E EV/EBITDA of 4.9x and 41% discount on 2021E P/E of 9.5x. We increased our DCF based TP to TRY29 vs TRY23.5,...
- Erdem Kaylı
TURKEY METALS & MINING - Slightly better results in 2Q20
Koza Gold’s 2Q20 net income of TRY470mn slightly beat our estimate of TRY443m and Research Turkey consensus of TRY422m due to better operating profitability - EBITDA of TRY477m beat our estimate of TRY416m (vs. RT consensus of TRY449m), driven by lower than expected cash costs. Despite lower gold production q-q, cash cost/oz was down by 7% q-q to USD587/oz (vs USD420/oz in 2Q19) driven by lower than expected R&D expenses and 11% TRY depreciation against the USD. Based on updated forecasts for m...
- Erdem Kaylı
Erdemir (EREGL TI) - Resilient operations in 2Q20: Maintain Buy
Backed by updated macro-indicator forecasts and higher sales volume assumptions, we raise our 12M TP (based on a weighted average of DCF and international peer multiples, assumptions unchanged) by 17% to TRY12.13. Despite the stronger flat steel pricing, we expect steel making margins to remain moderate in the short run due to a sharp increase in iron ore prices. However, we keep our constructive view on Erdemir as it offers an appealing risk/reward profile based on its strong balance sheet and ...
- Erdem Kaylı
TURKEY METALS & MINING - Broadly in-line results in 1Q20
Broadly in-line results in 1Q20 Koza Gold posted net income of TRY394m in 1Q20, slightly lower than our estimate of TRY436m and Research Turkey (RT) consensus of TRY437m. The deviation at the bottom line emanated from a higher-than-expected effective tax rate of 27% (vs BNPPe: 22%). EBITDA of TRY417m came in line with our estimate of TRY397m (vs RT consensus of TRY425m). In 1Q20, gold production was up by 5.4% y-y to 72k oz (vs 109k oz in 4Q19). This is 11% higher than our estimate of 65k oz, ...
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