Morning Note /
Global

Turkey: Strong 1Q results are definitely helping the resilience of the index

  • Global markets are in turmoil with rates rising much faster than imagined & equities are taking a hit in risk-off mode

  • Turkish equities held up well in the 2 days of trading last week

  • We don’t know how long we can continue to de-couple positively

Batuhan Ozsahin
ATA Invest
9 May 2022
Published by

Global markets are all in turmoil with rates rising much faster than imagined and equities are taking a hit in risk-off mode. Turkish equities held off well in the 2 days of trading last week but we don’t know how long we can continue to de-couple positively.

Strong 1Q results are definitely helping the resilience of the index. Tupras & Petkim announced a good set of results but more importantly the positive guidance change for Tupras is important and will keep the interest in the stock. Isbank will report this evening and our estimate is 11% higher than consensus and with stronger than expected Sise Cam profits, bottom-line will probably come even higher than our estimate.

We expect a volatile week with most of the companies finishing their reporting by Friday and with few stories to support in a globally risk-off mode, we could also continue to drift lower.

Macro news:

Real Effective Exchange Rate (REER) increased by 6.1% m/m to 57.05 in Apr’22 (Mar’22: 53.79).FX basket which is calculated as an average of Euro and US$ depreciated 0.3% m/m in Apr’22 (Mar’22: +5.4%).

Company news:

*TUPRS TI> 1Q22 Review: Operations are in line but net income is slightly lower. Tupras posted TL896mn net income in 1Q22, 12% lower than the consensus estimate of TL1,020mn…Tupras recorded TL4,467mn EBITDA (Consensus Est.: TL4,379mn) in 1Q22. 2022 guidance. The company revised its net refining margin guidance to US$8-9/bbl from US$2.5-3.5/bbl for 2022E vs. US$5.7/bbl in 2021. Also the company has been stopped providing Med complex refining margin guidance until market conditions normalize. The company maintained its sales volume guidance at 28-29mn tons, implying 1-5% increase and the company maintained its production volume guidance at 26-27mn tons, implying 4-8% increase in 2022E. Tupras maintained its CUR guidance at 90-95% in 2022E, compared to 88% in 2021. The company maintained its consolidated CAPEX guidance at US$300mn for 2022E.. Based on Bloomberg consensus estimates, Tupras trades at 4.84x 2022E EV/EBITDA multiple, implying %23 discounts compared to its 5-yr historic multiple. TUPRS remains in our tactical buy call list, considering the ongoing recovery in product cracks.

*PETKM TI> 1Q22 Review: Stronger than expected results…Petkim posted TL1,754mn net income in 1Q22, higher than our estimate of TL1,071mn and consensus estimate of TL1,046mn. Operating results were inline but net income was higher than expected thanks to higher than expected one-off income from investing activities related to fixed asset revaluation and higher than expected fair value difference on exchange rate-protected deposit accounts in 1Q22. The company posted TL1,553mn EBITDA in 1Q22, slightly lower than our estimate of TL1,591mn (consensus estimate:TL1,532). The company’s EBITDA/ton declined to US$188 in 1Q22 (ATA Est: US$180) from US$217 in 4Q21 due to higher feedstock prices. Please note that the company recorded US$46mn inventory gain in 1Q22 (4Q21: US$13.4mn). Petkim will hold conference call today at 16.00 Istanbul time.

*CCOLA TI> 1Q22 Review: Solid operating performance...CCOLA posted TL630mn net income in 1Q22, %2 lower than our estimate of TL643mn but 4% higher than consensus estimate of TL607mn net income. Negative impact of higher than expected financial expenses and tax expenses were offset by higher than expected operating profit. The company recorded TL1,721mn EBITDA which was 13% higher than our expectation of TL1,528mn and 7% higher than consensus estimate of TL1,603mn. In 1Q22, CCOLA recorded 19.9% EBITDA margin 61bps higher than our estimate of 19.2%. Based on our estimates, CCOLA is currently trading at 2022E 4.9x EV/EBITDA and 8.4x P/E. 5Y average EV/EBITDA and P/E multiples are 6.1x and 12.3x respectively.

*SAHOL TI> bought back 800K shares at an average price of TL19.91 on 06 May 2022. Since 09 Nov 2021, the total number of shares bought back reached 44.4mn at an average price of TL15.99

*ARCLK TI> bought back 740K shares at an average price of TL67.54 on 06 May 2022. Since 02 July 2021, the total number of shares bought back reached 62.2mn at an average price of TL42.39.

*BIMAS TI> bought back 80K shares at an average price of TL83.28 on 6 May 2022. Since 6 Dec 2021, the total number of shares bought back reached 3.6mn at an average price of TL71.00.

*TTRAK TI> total sales volume decreased by 13.7% in April...On a segmental basis, domestic volume decreased by 15.9% y/y whereas export sales volume declined by 9.2% y/y respectively. Going forward, we foresee TTRAK’s domestic tractor sales volume to decrease by 14.8% y/y to 27.2K units and export sales volume to increase by 11.4% y/y to 18.0K units in 2022E. We maintain our “Outperform” recommendation for TTRAK with our 12M TP of TL336.00. Based on our estimates, the company trades at 22E 5.5x EV/EBITDA and 22E 6.2x P/E, compared to its 5-year average 6.6x EV/EBITDA and 7.7x P/E multiple.

*AUTOS > LV sales declined by 2.4% y/y in April 2022 but stronger than we had thought... Turkish Light Vehicle (LV) sales fell by 2.4% y/y to 60.0K units in Apr’22, 16% higher than our estimate of 51.8K units at the beginning of the month. On a segmental basis, P. Car sales declined by 6% y/y to 45.6K units whereas LCV sales increased by 10% y/y to 14.5K units in April 2022. Our estimate for 2022E LV sales is 754K, implying 2% y/y increase.

Weekly Agenda:

May 9: AKSA 1Q22 Cons TL 504 mn

May 9: AKSEN 1Q22 Cons TL 788 mn

May 9: ENKAI 1Q22 Cons TL 2,050 mn

May 9: BIMAS 1Q22 Cons TL 1,222 ATA TL 1,324 mn

May 9: BIZIM 1Q22 Cons TL 24mn ATA TL 26 mn

May 9: MGROS 1Q22 Cons TL 27 mn ATA TL 63 mn

May 10: March Unemployment data(February 10.7%)

May 10: VAKBN 1Q22 Cons TL 3,066 mn ATA 3,112 mn

May 10: PGSUS 1Q22

May 10: SAHOL 1Q22

May 10: MPARK 1Q22

May 10: DOAS 1Q22 Cons TL 908 mn ATA 874 mn

May 10: ULKER 1Q22 Cons TL -152mn ATA -47 mn

May 11: April Cash Budget Balance

May 13: March Industrial Production

May 16: March Current Account Balance