Morning Note /
Turkey

Momentum still very strong for Turkish equities

  • Profit taking sales following the end of earnings season tomorrow

  • 4,350 and 4,400 will be the daily resistance levels

  • VESTL looks strong technically

ATA Invest
8 November 2022
Published byATA Invest

The momentum is still very strong in Turkish equities. Profit taking sales following the end of earnings season tomorrow towards 4,000 level may occur but we believe that should be a buying opportunity. 4,350 and 4,400 will be the daily resistance levels. 4,400 is the critical resistance level and should be broken up for further buying. VESTL looks strong technically. PGSUS prior its 3Q announcement tomorrow may outperform the index.

Company news:

*ISCTR TI> Isbank posted 3Q22 NI of TL15,038mn (+3.4% q/q), in line with our and consensus estimate. The key points of 3Q22 were 1) 3Q ROATE increased to 52.5% from 51.7% in 2Q 2) Net interest income (including swap costs) was up 12% q/q as CPI linker income increase 198% (higher CPI book plus CPI estimate revision from 50% to 65%), 3) Quarterly swap adjusted NIM declined 8bps q/q to 7.1%. Isbank’s CPI linker valuation methodology is different than its peers, hence we do not see q/q improvements in NIM as other banks. If Isbank used actual CPI for valuation, swap adjusted NIM would be 8.3% vs. 6.6% 4) Year-to-date TL loan growth reached 49%, with a visible slowdown in all segments except credit cards(+23% q/q) in 3Q, while FX loan book continued to shrink( -8.8% ytd 5) TL11.3bn of Isbank’s TL38bn net profit for 9M22 come from income from participations(mostly from Sise, hence return on equity and P/B comparisons must be done on an adjusted basis. Isbank shares are up 190% year-to-date vs. 141% for BIST banking index and 133% for BIST-100. 2022 has been an exceptional year for the banking sector in Turkey, mostly driven by the higher inflation impact on CPI linker valuations (37% of Garanti’s net interest income in 9M22 came from CPI linkers vs. 58% for Akbank). FX-protected deposit scheme and lower CBRT fund rate policy have benefited banks asset-liability management and also contributed to the improvement of core NIM. The strong economic activity in 2022(GDP +7.5% y/y in 1H22) have kept cost of risk low( 80bps for 9M22), hence provisioning costs remained muted

*VAKBN TI> Vakifbank posted 3Q22 NI of TL5,592mn (-20% q/q), 14% higher than our and consensus estimate. The key points of 3Q22 were 1) 3Q ROAE declined to 26.1% from 36% in 2Q, as the bank put a side TL5.5bn additional free provisions 2) Net interest income (including swap costs) was up only 4.4% q/q, as the CPI linker income boost from 85% Oct-Oct inflation will come in 4Q. Management expects TL29.4bn of CPI linker income in 4Q, compared to TL11.2bn in 3Q. 3) Quarterly swap adjusted NIM declined to 40bps q/q to 5.2% 4) Year-on-year TL loan growth reached 57%, with a visible slowdown in all segments in 3Q(12% q/q growth in 3Q vs 16% in 2Q, while FX loan book continued to shrink( -11% y/y) 5) NPL ratio declined to 2.4% in 3Q from 2.62% in 2Q with the help of strong collections as new NPL formation remained -TL26mn. Net cost of risk declined to 71bps from 205bps in 2Q. Vakifbank shares are up 155% year-to-date vs. 141% for BIST banking index and 133% for BIST-100. 2022 has been an exceptional year for the banking sector in Turkey, mostly driven by the higher inflation impact on CPI linker valuations). FX-protected deposit scheme and lower CBRT fund rate policy have benefited banks asset-liability management and also contributed to the improvement of core NIM. The strong economic activity in 2022(GDP +7.5% y/y in 1H22) have kept cost of risk low( 78 bps for 9M22), hence provisioning costs remained muted. Vakifbank’s quality of profitability on core banking operations is much lower than its private peers and with a balance sheet 40% larger than Akbank, YKB, in case of a slowdown, its already lower return on equity will take a larger hit. Hence, in the past 2 quarters, the bank has stepped up setting aside free provisions fasters than its peers and now has the highest amount of free provisions(surpassing Garanti) in the sector with TL9bn or 7.7% of its equity.

MPARK TI> 3Q22 Earnings Review: Medicalpark posted TL462mn net income in 3Q22, higher than our estimate of TL305mn. (Slightly positive, not rated) Medicalpark posted TL462mn net income in 3Q22, higher than our estimate of TL305mn and consensus estimate of TL269mn. Despite lower than expected net other income and higher than expected net loss from investing, higher than expected tax income led to higher than expected net income in 3Q22.The company’s consolidated revenue increased by 65% y/y to TL2.5bn thanks to strong growth in all segments in 3Q22. Excluding Sentez (İzmir, Gaziantep, and Batman Hospital), net sales increased by 93% y/y in 3Q22. Thanks to increasing domestic patient number and average prices, domestic patient revenue increased by 57% y/y to TL1,929mn in 3Q22, 2% lower than our estimate of TL1,960mn. In segmental basis, the inpatient revenue increased by 50% y/y to TL1,057mn in 3Q22 while the outpatient revenue increased by 65% y/y to TL871mn in the same period. The foreign medical tourism revenue increased to TL493mn in 3Q22 from TL207mn in 3Q21 thanks to appreciation of FX, volume and price growth. Revenue from other ancillary business declined by 7% y/y to TL54mn in 3Q22 due to decreasing in laboratory business in line with to focus on core business. The company’s EBITDA increased by 48% to TL590mn in 3Q22, 2% higher than our estimate of TL580mn (consensus: TL585mn). Excluding Sentez (İzmir, Gaziantep, and Batman Hospital), EBITDA increased by 66% y/y in 3Q22. The company’s gross margin improved by 27bps y/y to 29.3% which was higher than our estimate of 28.0%. The company’s EBITDA margin declined by 277bps y/y to 23.8% in 3Q22. The company’s net debt increased by 8% q/q to TL1,452mn in 3Q22. 12M-Trailing Net Debt/EBITDA declined to 0.73x in 3Q22 from 0.75x in 2Q22. Medicalpark’s Board had initiated a share buy-back programme up to 20.8mn shares, constitutng 10% of Medicalpark’s total number of shares and allocate up to TL650mn funds for this programme. The company’s free float stands at 35%. Please note that, the share buy-back program continues. Since 25 May 2022, the total number of shares bought back reached 6.2mn at an average price of TL47.28. The company will hold conference call today at 17.00 Istanbul time

*MPARK TI> bought back 35K shares at an average price of TL72.34 on 7 November 2022. Since 25 May 2022, the total number of shares bought back reached 6.3mn at an average price of TL47.28.

*PETKM TI> 3Q22 Review: Higher than expected income from investing activities led to higher than expected net income (neutral) Petkim posted TL1,495mn net income in 3Q22, higher than our estimate of TL708mn and consensus estimate of TL1,006mn. Despite lower than expected EBIT, higher than expected income from investing activities & net other income and higher than expected tax income led to higher than expected net income in 3Q22. The company posted TL687mn EBITDA in 3Q22, lower than our estimate of TL819mn (consensus estimate:TL874). The company’s EBITDA/ton declined to US$56 in 3Q22 (ATA Est: US$70) from US$120 in 2Q22. Please note that the company recorded US$12mn inventory loss in 3Q22 (2Q22: US$13mn). 

*AGHOL TI> posted TL1,767mn net income in 3Q22, higher than the consensus estimate of TL935mn. (Positive, not rated) AGHOL is currently trading at 33.7% discount compared its NAV whereas it was trading at 34.3% historically.

Weekly Agenda:

Nov, 8: TTKOM TI 3Q22 cons TRY 648 mn ATA TRY 831 mn

Nov, 8: BIMAS TI 3Q22 cons TRY 1,920 mn ATA TRY 1,947 mn

Nov, 8: PETKM TI 3Q22 cons TRY 1,006 mn ATA TRY 708 mn

Nov, 8: ULKER TI 3Q22 cons TRY 44 mn ATA TRY -48 mn

Nov, 9: PGSUS TI 3Q22 cons TRY 4,136 mn ATA TRY 4,120 mn

Nov, 9: DOAS TI 3Q22 cons TRY 1,674 mn ATA TRY 1,671 mn

Nov, 9: BIZIM TI 3Q22 cons TRY 28 mn ATA TRY 34 mn

Nov, 10: Sep unemployment rate

Nov, 10: BRSA Weekly Banking sector data

Nov,11: Sep Industrial Production Index

Nov, 11: Sep CAD