Earnings Report /
Turkey

Tofas: 3Q22 review – Better than expected results

  • Tofas recorded TL2,059mn net income, 15% higher than our est. and 13% higher than cons. est. in 3Q22.

  • The company reported TL2,682mn EBITDA, 8% higher than our estimate of TL2,489mn

  • TOASO is one of ATA Top picks and we assign high probability that agreement between KCHOL and Stellantis will be reached

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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ATA Invest
31 October 2022
Published byATA Invest

Tofas recorded TL2,059mn net income, 15% higher than our estimate of TL1,783mn and 13% higher than consensus estimate of TL1,820mn in 3Q22. Despite higher than expected net other operating and net financial expenses, higher than expected EBIT and higher than expected tax income led to better than expected bottom line.

The company reported TL2,682mn EBITDA, 8% higher than our estimate of TL2,489mn and 7% higher than consensus estimate of TL2,508mn. EBITDA margin of 16.4% was 50bps higher than our estimate of 15.9% and 30bps higher than consensus estimate of 16.1%.

Based on our 2022E estimates, the company trades at 5.8x EV/EBITDA, implying 17% discounts its 10-year median multiples of 6.9x.

Total sales volume was up by 48% y/y to 65.2K units in 3Q22. On a regional basis, export volume increased by 46% y/y to 29.1K units in 3Q22, whereas domestic sales volume increased by 50% y/y to 36.2K units during the same period. The company’s domestic LV market share increased by 418bps y/y while increasing by 198bps q/q to 21.6% in 3Q22. Average domestic unit prices increased by 97% y/y in TL terms in 3Q22, 1% lower than our estimate whereas average export unit price increased by 5% y/y in EUR terms, 5% higher than our estimate.

The company revised up its lower bands in exports and domestic sales guidance which are in-line with our estimates. Tofas revised down its upper band of domestic LV market guidance to 750-775 from 750K-800K, implying 2-5% y/y increase for 2022E (ATA Est: 754K). Tofas revised up its domestic retail sales guidance to 145K-155K from 140K-155K, implying 19-27% y/y increase and 18.7-20.7% market share in 2022E (ATA Est: 146K, 19.4%). The company revised up its exports sales volume guidance to 115K-125K from 110K-125K, implying 2-11% y/y increase for 2022E (ATA Est: 117K). Tofas revised down its CAPEX guidance to EUR50mn from EUR80mn for 2022E (ATA Est: EUR80mn).

The company turned to TL810mn net cash from TL1.8bn net debt thanks to strong cash flow from operations. The company’s NWC need increased by TL228mn q/q in 3Q22. The company’s cash conversion cycle increased by 1.0- days q/q to -18 days from -19 days. In 3Q22, receivable days remained flat q/q while inventory and payable days increased by 9.7-days and 8.7 days q/q, respectively. The company has Adj-FX long position of TL645mn in 3Q22 compared to long position of TL187mn in 2Q22.

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