Earnings Report /
Turkey

Aselsan: Higher than expected net income but NWC needs still increased

  • Aselsan reported TL1,696mn net income in 1Q22, 9% higher than our estimate of TL1,560mn.

  • The company posted TL1,037mn EBITDA in 1Q22, 4% higher than our estimate of TL1,001mn.

  • Based on our 2022 est, Aselsan is trading at 9.6x EV/EBITDA, implying 13% discount compared to its 5yr hist multiple

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 April 2022
Published byATA Invest
  • Aselsan reported TL1,696mn net income in 1Q22, 9% higher than our estimate of TL1,560mn and 18% higher than the consensus estimate of TL1,436mn. Despite the lower than expected net other income, higher than expected tax income and lower than expected financial expenses led to higher than expected net income in 1Q22.

  • The company posted TL1,037mn EBITDA in 1Q22, 4% higher than our estimate of TL1,001mn and consensus estimate of TL1,001mn. The company reported 23.7% EBITDA margin in 1Q22, 42bps lower than our estimate of 24.2% (Ras. Cons:24.3%).

  • Based on our 2022 estimates, Aselsan is trading at 9.6x EV/EBITDA, implying a 13% discount compared to its 5yr historic multiple. We maintain our “Marketperform” recommendation for Aselsan with 12M TP of TL33.17, implying 31% upside potential.

Revenue was 5% higher than our estimate of TL4.1bn in 1Q22. Revenues increased by only 38% y/y to TL4.37bn (-27% in US$ basis) in 1Q22. Aselsan’s backlog declined by 2% q/q to US$8.3bn. The company added US$180mn new project into its backlog in 1Q22. According to the company presentation, TL denominated backlog constituted 18% of total backlog whereas Euro and US$ denominated backlog constituted 38% and 44% of total backlog, respectively as of 1Q22.

EBITDA increased by 36% y/y TL1,037mn in 1Q22. The company’s gross margin improved by 71bps y/y to 30.1% which was 57bps higher than our estimate of 29.5%. Despite to the higher than expected gross margin, 82bps higher than expected opex/net sales ratio of 9.3% led to 42bps lower than expected EBITDA margin of 23.7% in 1Q22.

Aselsan maintained its guidance for 2022. The company management maintained (1) its topline growth guidance at “>25%” which was slightly lower our expectation of 30.6% y/y growth (2) its EBITDA margin guidance at “>22%” which is slightly lower than our estimate of 24.5% and (3) its CAPEX guidance at TL5.0bn for 2022 (ATA Est.:TL5bn).

Board proposed TL0.20 dividend per share, implying 0.8% dividend yield. This cash dividend implies TL460mn cash outflow and 6.5% dividend payout ratio (ATA Est.: 10% payout & TL0.31 DPS). The company plans to distribute its dividend on 16 November 2022.

The company’s net debt increased to TL5.65bn in 1Q22 from TL2.91bn in 4Q21. The company’s adjusted net working capital needs* (ST+LT NWC inc. prepaid expenses and deferred income) increased by TL3,122mn q/q to TL TL26,215mn in 1Q22.