Morning Note /
Global

Turkey: Today we expect a positive opening

  • Turkish equities keep its upward trend despite intraday profit taking sales

  • We remain positive on aviation companies

  • Foreign investors were on the buy side in Aug for TL 12.354 mn; for the fist time since Dec 2021

ATA Invest
8 September 2022
Published byATA Invest

Turkish equities keep its upward trend despite intraday profit-taking sales. Yesterday BIST 100 closed slightly abovethe 3,400 level. Today we expect a positive opening towards 3,420 and then 3,440 levels. 3,450 will be tested in case these resistance levels will be broken up.

We remain positive on aviation companies. We have an open trade idea on THYAO yet we recommend buying for TAVHL and PGSUS as well. TOASO and KCHOL may be in a catch up move. Foreign investors were on the buy side in Aug for TL 12.354 mn; for the fist time since Dec 2021.

Macro news:

Consumer Price Index (CPI) CPI increased by 1.46% m/m in Aug’22 (Bloomberg consensus: +2.00%). CPI increased by 1.46% m/m to 80.21% y/y in Aug’22. PPI increased by 2.41% m/m to 143.75% y/y in Aug’22. With the highest share in the calculation (%25.32), Food and Non-Alcoholic beverages increased by 0.85% m/m (+90.25% y/y) in Jul’22. Core inflation (excluding alcoholic beverages, tobacco products, energy and gold, B) increased by 72.53% y/y in Aug’22 (Jul’22: 68.46% y/y). With the Inflation Report published in Jul’22, Central Bank of Turkey increased its 2022 inflation target to 60.4% from 42.8%. (ATA Est.: 72.0%).

Company news:

* MPARK TI> bought back 43K shares at an average price of TL42.54 on 7 September 2022. Since 25 May 2022, the total number of shares bought back reached 3.4mn at an average price of TL37.90.

*TAVHL TI PGSUS TI THYAO TI > Total passenger number in Turkey’s airports was up by 20% y/y in August 2022... <Slightly Positive for THYAO, PGSUS and TAVHL> Domesic pax in Turkey decreased by 7.8% y/y in August 2022 to 8.13mn which was at 89.4% of its 2019 level. However, International pax in Turkey increased by 46.1% y/y in August 2022 to 13.77mn which was at 97.3% of its 2019 level. Istanbul airport’s, main hub of Turkish Airlines, total pax increased by 50% y/y in August 2022. Considering 50% y/y increased in passenger vs. 31% y/y increase in ATM per day in the same period, THYAO’s load factor is likely to increase y/y in August 2022. Total PAX in İstanbul airport was 6.82mn in August 2022 which was at 101% of its 2019 level. Total pax in Sabiha Gokcen, main hub of Pegasus, decreased by 1% y/y in August 2022. Domestic pax decreased by 23.9% y/y in August 2022 to 1.54mn which was at 77.4% of its 2019 level. International pax increased by 41.3% y/y to 1.52mn İn August 2022 which was at 106% of its 2019 level.

*PETKM TI> ethylene and aromatics plants will be under planned maintenance for 67 days as expected. We are downgrading Petkim to “Marketperform” Petkim announced that the company’s ethylene and aromatics plants will be under maintenance for 67 days starting on 07.09.2022. According to the company’s announcement planned outages for various durations are carried out in this maintenance period in the company’s plants. The company’s ethylene plant, which is the key unit of the company, will be out for 67 days. Petkim plans to meet the considerable amount of petrochemical sales, especially polymers sales, mostly from its inventories. The company had guided planned maintenance in its ethylene plants in their last analyst meeting and we had already expecting a maintenance shutdown for Petkim's ethylene plants, as it should be under maintenance every 4 years. Please note that, the company’s CUR declined to 81%in 2Q22 from 91% in 1Q22 due to periodic plant maintenance in PVC, MEG, PTA, and ACN units. The company had stated that the company expects its CUR rate to decline to 48% in Sep’22, 7% in Oct’22 ad 59% in Nov’22. We expect 85% and 50% CUR for 3Q22 and 4Q22, respectively. In its last major previous maintenance, which took place in 4Q18, the company’s EBITDA/ton and net income declined to US$21 and -TL44mn in 4Q18 from US$272 and TL413mn in 3Q18, respectively. We expect the company’s EBITDA/ton decline to US$125 and US$48 in 3Q22 and 4Q22, respectively (1Q22: US$188, 2Q22: US$120). The current trend signals that EBITDA/ton could be lower than expected. Petkim trades at 8.3x 2022E EV/EBITDA, implying 31% premium compared to 5-yr historic multiple of 6.3x. Due to limited upside considering the risk and rewards, we are revising down our recommendation for Petkim to “Marketperform” from “Outperform” and 12M TP at TL11.58/shr, implying 17% downside potential.

Weekly Agenda:

Sep 8: BRSA Weekly banking sector data