Earnings Report /
Turkey

Arçelik A.Ş: Impressive results and encouraging guidance…

  • Arcelik realised TL1,163mn net income in 4Q20, beating our estimate of TL948mn and consensus of TL938mn

  • Following better than expected 4Q20 results and upbeat guidance, we revised up our off-cons. 2021 EBITDA and net income

  • We also revised our 12-month TP for Arcelik to TL46 from TL44 while keeping Arcelik in our top picks

Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
26 January 2021
Published byATA Invest

Arcelik realised TL1,163mn net income in 4Q20, beating our estimate of TL948mn and consensus of TL938mn.  Higher than expected EBITDA margins supported by higher gross margins led to stronger than expected results.

Following better than expected 4Q20 results and upbeat guidance, we revised up our off-consensus 2021 EBITDA and net income estimates by 1% and 4.6% to TL5.7bn and TL2.8bn, respectively.  We also revised our 12-month TP for Arcelik to TL46 from TL44 while keeping Arcelik in our top picks.

Arcelik is currently trading at 5.0x 21E EV/EBITDA and 8.7x 21E P/E multiples, implying 43% and 46% discounts, respectively, compared to its global peers. 

Impressive topline growth of 59% y/y in 4Q20 supported by both domestic and international growth.  Domestic revenues surged by 63.3% y/y to TL3.99bn in 4Q20 whereas international revenues increased by 57.8% y/y to TL9.35bn, representing 70% of consolidated revenues, during the same period.  Thanks to stronger than expected growth for 3 consecutive quarters, Arcelik realised 28% topline growth in 2020, beating the guidance of “20-25% growth”. Regarding 2021, the management looks confident with topline growth guidance of c.20% and EBITDA margin guidance of c.11%, broadly in line with our estimate of 22.9% and 11.3%, respectively. We expect topline growth to be driven by 22.3% in Turkey and 23.6% in international (3.5% up in € terms) in 2021.

Thanks to improvement in gross margins, EBITDA surged by 122% y/y TL1,932mn in 4Q20.  EBITDA margin of 14.5% was better than our estimate of 13.1% and the consensus est. of 13.0%. Gross margin of 35.9% was 196bps above our estimates. Thanks to strong revenue growth and stricter opex management, Opex/Net sales ratio declined by 106bps y/y to 24.6%. Arcelik realised EBITDA margin of 13.1% in 2020, which was 12.4% when we exclude the one-offs. Despite pandemic concerns and weaker results in 1H20, Arcelik managed to realise 190bps improvement in 2020.   Despite rising raw material prices, we believe Arcelik will meet the EBITDA guidance of c.11% and our estimate of 11.3%, supported by higher operational leverage and growth in key regions.

Thanks to improvement in NWC and operating cash flow, Arcelik’s net debt declined by 5% q/q to TL5.1bn in 4Q20. Based on our calculations, working capital/net sales ratio declined by 470bps to 23.5%, q/q, in 4Q20 due to lower cash conversion days. Net Debt/EBITDA declined to 0.94x in 4Q20 from 1.24x in 3Q20. 

Deal with Hitachi is expected to be completed by April 2021 but not reflected into 2021 guidance and our estimates yet.  Hitachi GLS will establish an SPV, which owns sales&production subsidiaries outside Japan. Arcelik agreed to pay US$300mn for 60% stake of the SPV. This deal is likely to increase Arcelik footprint in Asia and create synergies for both brand in the global appliance market. Despite acquisitions, we expect TL2.10/shr cash dividend this year, implying 5.9% yield.