Morning Note /
Global

Turkey: We expect a positive opening

  • A more benign outlook on global markets and strong set of 1Q results continue to support Turkish equities

  • Ford Otosan & Tofas both reported good set of results with higher average pricing pushing top-line growth

  • We expect Akbank & Turkish Airlines to react positively to results

Batuhan Ozsahin
ATA Invest
28 April 2022
Published by

A more benign outlook on global markets and strong set of 1Q results continue to support Turkish equities.

We have a flurry of results today with Turkish Airlines and Akbank reporting stronger than expected bottom-line than consensus estimates.

Ford Otosan & Tofas both reported good set of results with higher average pricing pushing top-line growth. There is nothing exciting about Turk Telekom’s results. The company faces low top-line growth difficulty with slow re-pricing of longer term contracts.

We expect Akbank & Turkish Airlines to react positively to results, while Turk Telekom which is distributing dividend today TL1.42/share(11.37% yield) should be a laggard.

Macro news:

Company news:

*AKBNK TI> Akbank posted 1Q22 net income of TL8,049(+68% q/q and +297% y/y), 6% lower than our and 9% higher than consensus estimate. Key points of 1Q22 were 1) Quarterly ROE reached 38.6% after 26.2% in 4Q21(12.9% in 1Q22) and management maintained for >30% ROE for 2022. 2) Net interest income (including swap costs) was up 42% q/q as CPI linker income soared 78% q/q with the help of a larger CPI linker book & higher inflation estimate. The contribution from CPI linkers should continue with an increasing scale as Akbank uses 35% for Oct-Oct CPI estimate, while every 100bbps increase in CPI contributes TL430mn to NI, 7bps to NIM and 45bps to ROE 3) Quarterly swap adjusted NIM improved 182bps q/q to 505bps with 129bps coming from securities. Akbank shares are up 31% year-to-date vs. 33% for BIST Banking Index and 32% for BIST-100. The strong earnings momentum boosted by 1) The favorable asset-liability re-pricing( funding costs are artificially low vs. relatively resilient loan rates. 2) The mega contribution from CPI linkers(TL5,591mn CPI linker income compared to TL9,792 in all of 2021).

*TTKOM TI> 1Q22 Earnings Review: Broadly in line with expectations. Turk Telekom recorded TL561mn net income in 1Q22, broadly in line with consensus est. of TL539mn and our est. of TL538mn. Negative impact of higher than expected financial expenses was offset by higher than expected tax income. Supported by stronger than expected topline growth, Turk Telekom’s EBITDA increased by 8.2% y/y to TL4.12bn in 1Q22, beating our estimate of TL4.02bn and consensus of TL4.05bn. Including IFRIC 12, revenues increased by 24.8% y/y to TL9.47bn, beating our estimates by 1.2%. Management maintained its 2022E guidance: 1) Topline growth guidance (exc-IFRIC12) of 23-25% versus our estimate of 27% (2) EBITDA guidance of TL17.5-18.3bn versus our estimate of TL18.7bn and (3) Capex guidance to c.TL12.5bn versus our estimate of TL12.2bn

*TTKOM TI> goes ex-dividend today, paying TL1.42/shr (11.37% div. yield)

*EREGL TI> 1Q22 Review: Slightly better than expected results... Erdemir realised a net income of TL5,626mn, higher than our estimate ofTL5,502mn and consensus estimate of TL5,478mn mainly due to higher than expected EBITDA. The company realised an EBITDA/ton of US$360 in 1Q22, beating our estimate of US$346 by 4.0%. Positive impact of higher than expected average prices (+2.1%) surpassed the negative impact of higher than expected cash cost/ton (+1.1%) and the company recorded EBITDA of TL9,907mn in 1Q22, 1.2% above our estimates and 7.3% above consensus. We currently have a 12-mnth TP of TL54/shr, implying 77% upside potential, including 20% cash dividend. Following the stronger than expected 1Q22 results, we will further review our estimates

*TOASO TI> 1Q22 Review: Better than expected results...Tofas recorded TL1,129mn net income, 13% higher than our estimate of TL1,001mn and 6% higher than consensus estimate of TL1,064mn in 1Q22. Despite higher than expected net other operating expense& financial expense, TL319mn higher than expected EBIT led to better than expected bottom line. The company reported TL1,738mn EBITDA, 15% higher than our estimate of TL1,509mn and 9% higher than consensus estimate of TL1,597mn. EBITDA margin of 15.9% was 125bps higher than our estimate of 14.7% but 52bps lower than consensus estimate of 16.5%. Based on our 2022E estimates, the company trades at 5.7x EV/EBITDA and 7.2x P/E compared to its 5-year average multiples of 6.1x and 6.1x, respectively.

*FROTO TI> 1Q22 Review: Higher than expected net income… Ford Otosan posted TL2,802mn net income in 1Q22, 8% above our estimate of TL2,587mn and 5% above consensus estimate of TL2,672mn. Despite TL839mn higher than expected net financial expenses, TL470mn higher than expected operating profit and TL597mn higher than expected tax income led to TL215mn higher than expected net income. Ford Otosan’s EBITDA increased by 64% y/y to TL2,971mn, 1% above our estimate of TL2,938mn and 1% above consensus estimate of TL2,948mn in 1Q22. EBITDA margin of 10.7% was 29bps lower than our estimate of 10.9%. Based on our 2022E estimates, the company trades at 7.6x 22E EV/EBITDA and 7.9x P/E compared to its 5-year historical multiples of 8.0x and 9.2x, respectively.

ARCLK TI> bought back 291K shares at an average price of TL67.02 on 27 April 2022. Since 02 July 2021, the total number of shares bought back reached 61.0mn at an average price of TL41.90.

SISE TI> bought back 1.92mn shares at an average price of TL17.46 on 27 April 2021. Since February, 26 2021, the total number of shares bought back reached 58.5mn at an average price of TL11.37.

Weekly Agenda:

Apr 28: TKFEN 1Q22 financials cons TL 745 mn ATA TL 616 mn

Apr 28: THYAO 1Q22 financials cons TL 1,200 mn ATA TL 1,509 mn

Apr 28 TCELL 1Q22 financials cons TL 905 mnATA TL 843mn

Apr 28: TTKOM dividend payment TL 1.42/share

Apr 29: March Trade Balance ( Consensus -USD8.2bn, February -USD7.88bn)

Apr 29: YKBNK 1Q22 financials cons TL 6,088 mn ATA TL 6,436 mn

Apr 29: TURSG dividend TL 0.46/share