Morning Note /
Turkey

Turkish equities continue their Santa rally because of TL weakness

  • TL depreciation’s long lasting impact on inflation will show most of its impact in 1H22

  • CBRT has renewed its swap lines with Qatar’s Central Bank

  • Mavi posted TL153mn net income, beating the consensus estimates of TL128mn (positive)

ATA Invest
8 December 2021
Published byATA Invest

Turkish equities continue their Santa rally because of TL weakness as most industrial companies are outperforming led by Sise and Erdemir, while have been major laggards over the past one month. TL depreciation’s long-lasting impact on inflation will show most of its impact in 1H22, as we will see who managed their costs well beyond their revenue growth.

CBRT has renewed its swap lines with Qatar’s Central Bank, but we do not value these “lines” much as they have not helped to TL’s depreciation in these volatile days because mechanically they do serve as cash credit lines.

Company news:

*BIMAS TI> bought back 55K shares at an average price of TL77.50 on 7 Dec 2021.

*SAHOL TI> bought back 100K shares at an average price of TL13.96 on 7 Dec 2021. Since 09 Nov 2021, the total number of shares bought back reached 4.0mn at an average price of TL13.53.

*MAVI TI> 3Q21 Results: Mavi posted TL153mn net income, beating the consensus estimates of TL128mn (positive) Mavi realised TL1,354mn net sales implying 64% y/y growth in 3Q21, inline with consensus estimate of TL1,356mn. Please note that Turkey operations experienced a full lock-down period until May 17 and some restrictions on weekends until the end of May. Since June 1st , all operations are back to normal trading hours and delivered 73% y/y net sales growth in 3Q21 on the top of a relatively strong base. The share of e-commerce increased to 26.4% in 3Q21 from 13.4% in 2Q21 and 8.3% in 3Q20. The company’s gross margin improved by 73bps y/y to 51.1% while the company’s OPEX/Net Sales ratio declined to 32.8% in 3Q21 from 36.3%% in 3Q20. The company reported 24.9% EBITDA margin, implying 118bps improvements in 3Q21. In Turkey, Mavi opened 3 net new retail stores in 3Q21 and plans to open a total of net 7 stores in 2021. As of 9M21, Mavi’s total store number in Turkey is 391 (retail: 325 and franchise: 66). Internationally, the company the company opened 1 net new stores bringing the total number of stores to 62. (Canada:4, Europe: 1, Russia: 36, rest of the world: 21) The company’s 12M-Trailing Net Debt/EBITDA declined to 0.15x in 3Q21 from 0.41x in 2Q21. The company revised up its 2021 guidance. The company revised up its revenue growth guidance to 80-85% from 70-75% (2) EBITDA Margin (inc. IFRS-16) guidance to 20.5-21.0% from 20.0-20.5% (3) net stores openings guidance to 7 net stores from 5 net stores while the management maintained its 9 store expansion guidance and CAPEX guidance of 3.5% of sales. Mavi will hold a teleconference today at 16:00 Istanbul time.

Total PAX in Turkish airports increased to 11.3mn in November, 78% of its 2019 level...<Neutral for THYAO, PGSUS and TAVHL> Domestic PAX in Turkey increased to 6.3mn in November which is 79% of its 2019 level (ATA Estimate: 6.6mn, 83% of 2019 level). Considering domestic PAX in Turkey was 7.1mn in October which was 84% of its 2019 level, there is a m/m decrease in domestic PAX trend. International PAX increased to 5.0mn in November which is 77% of its 2019 level (ATA Estimate: 4.3mn, 66% of 2019 level). Considering international PAX in Turkey was 8.6mn in October which was 79% of its 2019 level, there is a m/m decline in international PAX trend in Turkey. Despite higher international PAX than our estimates we see a decline in PAX trends mainly due to low season. Istanbul Airport’s, main hub of Turkish Airlines, total PAX increased by 120% y/y to 3.8mn in November. Considering 120% y/y increase in total PAX vs. 80% y/y increase in ATM per day in the same period, THYAO’s load factor is likely to increase y/y in November. Total PAX in Sabiha Gokcen, main hub of Pegasus, increased by 60% y/y to 2.4mn in November which is 83% of its 2019 level. Considering total PAX was 2.8mn in October which was 88% of its 2019 level, there is a m/m decline in total PAX trend in Sabiha Gokcen. Also, considering 60% y/y more PAX vs. 38% y/y more ATM per day in the same period, PGSUS’ load factor is likely to increase y/y in November.

Weekly Agenda:

Dec 10: CBRT December Expectations Survey Dec 10: October Unemployment Rate (September 11.5%)

Dec 13: October Current Account Balance (Consensus USD1.65bn)

Dec 13: October Industrial production