· CCOLA posted TL1,819mn net income in 3Q22, 7% lower than our estimate of TL1,958mn and 7% lower than consensus estimate of TL1,949mn net income. Higher than expected tax expenses was the main reason behind lower than expected net income in 3Q22.
· The company recorded TL3,729mn EBITDA which was 2% lower than our expectation of TL3,814mn and 3% lower than consensus estimate of TL3,834mn. In 3Q22, CCOLA recorded 21.4% EBITDA margin, 79bps lower than our estimate of 22.2%.
· Based on our estimates, CCOLA is currently trading at 2023E 3.7x EV/EBITDA, implying 34% discount to its 5-yr average of 5.6x.
CCOLA posted TL17,413mn net sales in 3Q22, 1% higher than our estimate of TL17,182mn. In 3Q22, domestic sales increased by 122% y/y to TL6,466mn whereas international sales increased by 182% to TL10,976mn during the same period. Acquisition of CCBU was completed on 29 September 2021. CCBU financial results were fully consolidated as of 1Q22. On an organic basis, excluding Uzbekistan figures, net sales increased by 129% y/y in 3Q22.
CCOLA registered 7.5% y/y volume growth in 3Q22, reaching 468mn UC. Turkey’s volume declined by 7.8% y/y in 3Q22 mainly due to relatively lower consumer confidence amid a high inflation environment, deteriorating real disposable income, and less favorable weather in Jul-Aug compared to the 2021 and high base in 3Q21. International operations posted 19.8% y/y volume growth in 3Q22. Organic volume growth was 1.1% y/y 3Q22. Uzbekistan sales volume increased by 40.1% y/y in 3Q22. Pakistan sales volume increased by 4.6% y/y in 3Q22. Kazakhstan sales volume increased 8.3% y/y in 3Q22.
Consolidated gross margin decreased by 189bps y/y to 33.8% in 3Q22. Despite TL depreciation and higher raw material&energy cost, domestic gross margin increased to 37.4% in 3Q22 from 35.1% in 3Q21 thanks to price increases and better channel&package mix. International gross margin declined to 31.7% in 3Q22 from 36.0% in 3Q21 due to higher raw material prices, currency depreciations, significantly higher energy cost and the dilutive impact of Uzbekhistan in 3Q22. Consolidated OPEX/Sales declined by 85bps y/y to 15.1% in 3Q22. Consolidated EBITDA margin declined by 236bps y/y to 21.4% in 3Q22.
CCOLA maintained its 2022E guidance. Management maintained its consolidated volume growth guidance at high single digit to low-teens (ATA Expectation: 11.9%). On a proforma basis (100% consolidation of CCBU for 2021 and 2022), management maintained its volume growth guidance at “mid-single-digit growth”. Management maintained its net sales growth guidance (FX-neutral) at low to mid 40%. Management maintained its EBITDA margin guidance at flat to -100bps contraction in EBITDA margin compared to 2021 (ATA Expectation: -140bps). The management maintained its NWC/Sales guidance at low single-digit (ATA Expectation: 3.0%). The management maintained its CAPEX/Sales guidance at 8-10% (ATA Expectation: 8.3%).
CCOLA’s net debt declined by 11% q/q to TL6,697bn in 3Q22. The company’s NWC need declined by TL177mn q/q in 3Q22. Receivable days declined by 9.5-days q/q, inventory days declined by 1.9-days q/q and payable days declined by 9.2-days q/q in 3Q22. Cash conversion cycle declined by 2.2-days q/q to 11days in 3Q22 CCOLA has TL1,339mn net short FX position in 3Q22, compared to TL1,656mn net short FX position in 2Q22.
The company will hold an analyst teleconference today (1 November, 2022) at 16:00PM Istanbul time.