Earnings Report /
Turkey

Ford Otosan: 3Q21 review – Better-than-expected results on all fronts

  • FROTO posted TL1,892mn net income in 3Q21, 22% above our estimate of TL1,549mn and 16% above consensus of TL1,637mn.

  • Ford Otosan’s EBITDA increased by 42% y/y to TL2,036mn

  • Based on our current estimates, the company trades at 8.3x 22E EV/EBITDA and 9.2x P/E

Aytunc Uz
Aytunc Uz

Equity Research Analyst

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Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
28 October 2021
Published byATA Invest

Ford Otosan posted TL1,892mn net income in 3Q21, 22% above our estimate of TL1,549mn and 16% above consensus estimate of TL1,637mn. Despite TL33mn lower than expected net investment expenses, positive effect of TL243mn higher than expected EBIT, TL96mn higher than expected financial income and TL38mn less than expected tax expenses led to TL343mn higher than expected net income.

Ford Otosan’s EBITDA increased by 42% y/y to TL2,036mn, 9% above our estimate of TL1,860mn and consensus estimate of TL1,880mn in 3Q21. EBITDA margin of 10.8% was 59bps higher than our estimate of 10.2%.

Based on our current estimates, the company trades at 8.3x 22E EV/EBITDA and 9.2x P/E compared to its 5-year historical multiples of 8.0x and 9.8x, respectively.

Total sales volume was up by 4% y/y to 99.7K in 3Q21. Domestic sales volume decreased by 59% y/y to 14.0K units in 3Q21, whereas export volume was up by 40% y/y to 85.7K units during the same period. Ford’s domestic LV market share decreased by 418bps y/y whereas increased by 66bps q/q to 9.0% in 3Q21. Accordingly, consolidated revenue boosted by 41% y/y to TL18.9bn in 3Q21, 4% above our estimate.

FROTO revised down its 2021E guidance. The company cut its 2021E guidance for Turkish industry volume to 825K-875K from 900-950K units. (ATA expectation: 903K units). The company revised down its 2021E guidance for domestic sales volume to 80K-90K from 95-105K units. (ATA expectation: 96K units). FROTO cut its export guidance for 2021E to 305K-315K from 315-325K units. (ATA expectation: 318K units).  FROTO decreased its capex guidance to EUR350-400mn from EUR375-425mn. (ATA expectation: EUR400mn).

FROTO’s Board proposed to pay TL3.77shr cash dividend from 2020 net income, implying 2.3% dividend yield. This cash dividend implies TL1.3bln cash outflow and 31.5% dividend payout ratio. Ford Otosan Board aims to distribute cash dividend by 19 November 2021.

FROTO is in TL421mn net cash position in 3Q21 compared to TL3,942mn net debt in 2Q21, mainly due to TL3,646mn q/q decrease in NWC and strong EBITDA generation. FROTO’s receivable, inventory and payable days decreased by 20-, 21- and 6- days q/q respectively in 3Q21. Cash conversion cycle decreased by 34-days q/q in 3Q21. As of 3Q21-end, the company has TL683mn net FX long position compared to TL1,176mn net FX long position in 2Q21-end.

We will elaborate the details and the 2021 outlook with the company during analyst meeting (1 Nov, 2021) at 16:30 AM Istanbul time.