Strategy Note /

Turkey strategy: A gem mine or a value trap

  • In our top picks list: Arcelik , Bimas, Erdemir , Migros , Sisecam, Tav Hava Limanları and Turk Telekom

  • We REMOVED Tofas <TOASO TI> from our top picks

  • We revised up our 12-month BIST-100  target to 2,250 from 2,000, indicating an upside of 32%

Zeynep Erman
Zeynep Erman

Equity Research Analyst

Batuhan Ozsahin
Aytunc Uz
Cemal Demirtas
ATA Invest
16 November 2021
Published by

2021 will be remembered as a year of unfulfilled promises as the start of the year looked like the political body had realized its “moment of truth”. There was a strong will to finally adopt an orthodox monetary policy to fight against inflation and a new path for economic and judicial reforms to encourage new investments and promote production, simplify tax code and improve rule of law. As we stand today, there is a mixed bag of results with good record on economic growth (GDP up 14.3% y/y in 1H21), another failing year on inflation (19.9% y/y in October) but more importantly, Lira depreciating another 25% against US$, despite the Current Account deficit improving to 2.1% at YE21 from 5.1% for 2020.

Presidential & parliamentary elections are set for June 2023 and President Erdogan re-iterated time and again that elections will be held on time. Sharp rises in the cost of living since 2018 have dented AKP’s popularity in polls to its lowest rating in years, however the opposition still does not have a clear candidate against President Erdogan. The region has become somewhat more stable in 2021 as tensions in Libya, East-Med gas drilling rights and the conflict in Syria have become relatively less important. Turkey’s relations with the EU and US have also become more neutral compared to the previous five years but there has not been any exciting progress on either front.

2021 has again been a volatile year for Turkish equities, as BIST-100 is up by 15% in TL terms but MSCI Turkey still underperformed MSCI EM by 16% year-to-date. BIST-Industrials index is once again outperforming the BIST-banks by 21% year-to-date, as banks are still recovering from the shock of the unexpected removal of CBRT governor in March (despite a 54% y/y net profit growth for private sector banks in 9M21). Basic metals (Erdemir, Kardemir), Transportation (Turkish Airlines, TAV, Pegasus) and Chemicals & Petroleum (Tupras, Petkim, Aksa) have been the main outperforming indices. Local investors have become a  more dominant force in 2021, as their share in the free float of the equity market reached to 57% from 39% at YE19. The market is now trading at 5.1x 2022 P/E (Ata coverage), at a 60% discount to EM peers. 

In our top picks list: Arcelik , Bimas, Erdemir , Migros , Sisecam, Tav Hava Limanları and Turk Telekom.

We have removed Tofas from our top picks list mainly due to a decrease in risk-return profile after 84% increase in share price since early August 2021. We have increased our 12M TP to TL70.0 from TL62.90 and we keep our rating at “Outperform”, mainly due to the upside risk created by the new EV investment.

Rating Revision:

BIZIM is upgraded to “Marketperform" from “Underperform”.

PETKM is downgraded to “Marketperform” from “Outperform”


At 5.1x 2022 P/E (5.9x Bloom. Cons.), the market is at a 60% discount (Ata estimate vs. MSCI EM compared to a 5-year discount of  44%).

Turkey’s strong manufacturing base & a more competitive currency are helping exports. Gradual normalization in travel will help tourism revenues and financing of CA deficit but higher energy prices will neutralize some of that advantage.


High inflation compared to EM peers continues to be the Achilles’ heel of Turkey’s macro and returning to single digits could take time unless patience in tight monetary policy is kept.

Foreign investors' lack of appetite for TL denominated government debt could limit the banking system’s ability to finance both loan growth and public spending going forward, hindering economic growth potential. 

Click through to access the full 48-page strategy report.