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Turkey

Turk Traktor: Q322 review – Stronger than expected results

  • Turk Traktor posted TL653mn net income in 3Q22, 24% higher than our estimate and 22% higher than consensus estimate.

  • The company posted TL920mn EBITDA, 15% above our estimate of TL800mn and 17% above consensus estimate of TL785mn

  • EBITDA margin of 16.0% was 85ps higher than our estimate of 15.2% (Consensus: 14.8%).

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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ATA Invest
31 October 2022
Published byATA Invest

Turk Traktor posted TL653mn net income in 3Q22, 24% higher than our estimate of TL524mn and 22% higher than consensus estimate of TL534mn. Positive impact of higher than expected EBIT and lower than expected other expense from operating expense led to higher than expected net income in 3Q22.

The company posted TL920mn EBITDA, 15% above our estimate of TL800mn and 17% above consensus estimate of TL785mn in 3Q22. EBITDA margin of 16.0% was 85ps higher than our estimate of 15.2% (Consensus: 14.8%).

Based on our 2023E estimates, the company trades at 4.9x EV/EBITDA and 5.9x P/E, compared to its 5-year average 6.3x EV/EBITDA and 7.1x P/E multiple.

Total sales volume increased by 1% y/y in 3Q22. Domestic sales volume declined by 7% y/y in 3Q22, 1% lower than our estimates whereas export sales volume increased by 13% y/y in line with our estimate, during the same period. Consolidated revenue was up by 133% y/y to TL5,736mn which was 9% above our estimate of TL5,264mn.

EBITDA margin increased by 265bps y/y to 16.0% in 3Q22. The company’s EBITDA was up by 179% y/y to TL930mn in 3Q22. The company’s gross margin increased by 309bps y/y to 19.6% which was 64bps higher than our estimate.

The company revised its 2022E guidance. The company revised up its domestic farm tractor market volume guidance to 59.5K-63.5K from 53K-59K, implying 1-7% y/y decline in 2022E (ATA Est.: 58.7K). TTRAK revised down its upper band of domestic sales volume guidance to 26.5K-28.5K from 26.5-30.0K, implying 11-17% y/y decline in 2022E (ATA Est.: 27.3K units). TTRAK revised up its export sales volume guidance to 17.3K-18.3K from 16.5K-18.5K, implying 7-13% y/y increase in 2022E (ATA Est.: 17.7K). The company revised up its CAPEX guidance to TL650-800mn from TL600-800mn CAPEX in 2022E (ATA Est.: TL609mn).

The company’s net debt declined to TL555mn in 3Q22 from TL1.6bn in 2Q22. The company’s NWC needs declined by TL276mn q/q in 3Q22. The company’s receivable and inventory days declined by 4-days and 18-days in 3Q22, respectively, while payable days declined by 11-days in the same period which decreased cash conversion cycle by 10-days q/q in 3Q22. Net long FX position increased to TL778mn in 3Q22 versus TL200mn net long position in 2Q22.