Earnings Report /
Turkey

Tofas: 2Q22 review – Better-than-expected results

  • Tofas recorded TL1,876mn net income, 12% higher than our estimate and 14% higher than consensus estimate in 2Q22.

  • EBITDA margin of 16.4% was 170bps higher than our estimate of 14.7% and 135bps higher than consensus estimate of 15.0%.

  • We believe that the initial reaction to the results will be positive thanks to strong operating performance.

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
27 July 2022
Published byATA Invest
  • Tofas recorded TL1,876mn net income, 12% higher than our estimate of TL1,670mn and 14% higher than consensus estimate of TL1,650mn in 2Q22. Despite higher than expected net other operating expense, TL232mn higher than expected EBIT and TL100mn lower than expected tax expenses led to better than expected bottom line.

  • The company reported TL2,572mn EBITDA, 9% higher than our estimate of TL2,354mn and 9% higher than consensus estimate of TL2,354mn. EBITDA margin of 16.4% was 170bps higher than our estimate of 14.7% and 135bps higher than consensus estimate of 15.0%.

  • Based on our 2022E estimates, the company trades at 4.5x EV/EBITDA and 5.9x P/E compared to its 5-year average multiples of 5.3x and 5.8x, respectively.

Total sales volume was up by 5% y/y to 69.8K units in 2Q22. On a regional basis, export volume increased by 3% y/y to 30.4K units in 2Q22, whereas domestic sales volume increased by 7% y/y to 39.3K units during the same period. The company’s domestic LV market share increased by 235bps y/y while increasing by 274bps q/q to 19.6% in 2Q22. Average domestic unit prices increased by 97% y/y in TL terms in 2Q22, in-line with our estimate whereas average export unit price increased by 18% y/y in EUR terms, 1% higher than our estimate.

15K lower exports will be covered by 15K higher domestic sales. Tofas revised up its domestic LV market guidance to 750-800 from 700K-750K, implying 2-8% y/y increase for 2022E (ATA Est: 754K). Tofas revised up its domestic retail sales guidance to 140K-155K from 125K-140K, implying 14-27% y/y increase and 17.5-20.7% market share in 2022E (ATA Est: 138K, 18.3%). The company revised down its exports sales volume guidance to 110K-125K from 125K-140K, implying 2% y/y decline and 11% y/y increase for 2022E (ATA Est: 122K). Tofas revised down its CAPEX guidance to EUR80mn from EUR100mn for 2022E. We expect Tofas to spend EUR100mn in terms of capex in 2022E.

Net debt was down by 82% q/q to TL1.8bn thanks to strong cash flow from operations. The company’s Net Debt/EBITDA declined to 0.14x in 2Q22 from 0.69x in 1Q22. The company’s NWC need declined by TL804mn q/q in 2Q22. The company’s cash conversion cycle declined by 7.2- days q/q to -19 days from -12 days. In 2Q22, receivable and payable days increased by 1- and 2- days q/q while inventory days decreased by 6-days q/q. The company has Adj-FX long position of TL187mn in 2Q22 compared to long position of TL74mn in 1Q22.

The company will hold a teleconference on Wednesday, July 27th 2022, at 17:00 Istanbul Time (15:00 UK time).