Morning Note /
Global

Turkey: We do not think that the market will react to inflation data

  • Turkish equities continue to break new records in Lira terms

  • There is absolutely no interest from international investors as they fear from further Lira weakness

  • We do not think that the market will react to inflation data and the market will continue its momentum.

Batuhan Ozsahin
ATA Invest
3 June 2022
Published by

Turkish equities continue to break new records in Lira terms,as investors are flocking into Borsa Istanbul to shield themselves from surging inflation. There is absolutely no interest from international investors as they fear further Lira weakness, which makes them impossible to make money out of any naked Turkey positions. International investors have not made money in Turkey since 2013 because of ever-weakening Lira. CBRT’s stance on monetary policy is far from giving confidence on the future of the Lira. Today is CPI day and we expect annual inflation to climb to 77.6%(5.4% m/m). We do not think that the market will react to inflation data and the market will continue its momentum.

Macro news:

According to Ministry of Trade, the foreign trade deficit increased by 157.0% y/y to US$10.68bn in May’22. Proportion of imports covered by exports declined by 1,587bps y/y to 64.0% in May’22. Exports increased by 15.2% y/y to US$18.97bn while imports increased by 42.8% to US$29.65mn in May’22. The foreign trade deficit declined by 136.1% y/y to US$43.23bn in 5M22.

Company news:

*MPARK TI> bought back 50K shares at an average price of TL36.00 on 2 June 2022. Since 25 May 2022, the total number of shares bought back reached 385K at an average price of TL35.55.

*TTRAK TI> total sales volume decreased by 8.6% y/y in May... On a segmental basis, domestic volume decreased by 12.1% y/y whereas export sales volume declined by 1.1% 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 6.3x P/E, compared to its 5-year average 6.6x EV/EBITDA and 7.6x P/E multiple.

*AUTOS - May 2022 Domestic Sales: LV sales increased by 19.1% y/y in May 2022, slightly better than our estimate of 63.5K. Turkish Light Vehicle (LV) sales increased by 19.1% y/y to 65.2K units in May’22, slightly above our estimate of 63.5K units at the beginning of the month. On a segmental basis, P. Car sales increased by 20% y/y to 51.8K units whereas LCV sales increased by 16% y/y to 13.4K units in May 2022. Our estimate for 2022E LV sales is 754K, implying 2% y/y increase.

Weekly Agenda:

June 3: May CPI (Consensus 3.85%, ATA 5.4%)