Earnings Report /
Turkey

BIM: Weaker than expected EBITDA margin

  • Bim realised TL1,775mn net income in 3Q22, weaker than our estimate of TL1,947mn and consensus estimate of TL1,920mn.

  • Bimas’ quarterly EBITDA margin fell to 7.0% in 3Q22, which is the lowest quarterly EBITDA margin since 2018.

  • We maintain our “outperform” rating and keep BIMAS in our top picks list.

Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
9 November 2022
Published byATA Invest

Bim realised TL1,775mn net income in 3Q22, weaker than our estimate of TL1,947mn and consensus estimate of TL1,920mn. Weaker than expected EBITDA was the major reason behind weaker than expected income.

Supported by stronger than expected LfL growth, net sales were 3.5% above both our estimates and consensus estimates. EBITDA margin of 7.0% was lower than our estimate of 8.1% and consensus estimate of 8.2%.

Higher than expected cost of sales and operating expenses were the reasons behind significant deviation of EBITDA from our estimates. In high inflationary environment, the pace of cost of sales were higher than the pace of revenue growth y/y in 3Q22. High energy expenses as well as high personnel expenses had negative impact on margins despite operational leverage.

We will further elaborate the details with management in order to understand if EBITDA margin of 7.0% is temporary or they will revise their 2022 EBITDA margin guidance of 8.5% (+/-0.5%).

Topline growth of 135% y/y in 3Q22 was 3.5% above both our estimates and consensus. Strong store openings trend continued in 3Q22. Bim opened 188 new hard discount stores and 11 File stores in Turkey in 3Q22. The company opened 6 new stores in Morocco and 4 stores in Egypt during the same period.  LfL sales growth was 117.5% y/y in 3Q22 which was driven by 7.9% increase in customer traffic and 101.6% LfL basket during the same period.  Despite lower pace of traffic growth, strong basket growth in 3Q22 gives positives signal about the LfL growth prospects for the rest of the year. We believe that Bim gained significant market share in Turkish food retail sector while investing in prices and increasing the traffic.

EBITDA margin was 7.0% in 3Q22, significantly below our estimate of 8.1%. Bim’s gross margin declined by 114bps y/y to 17.7% in 3Q22, 34bps below our estimates. Coupled with lower than expected gross margin, higher than expected opex/net sales ratio by 83bps led to lower than expected EBITDA margin.  We expect recovery in Bim’s EBITDA margin in the following quarters considering higher operational efficiency and higher growth.

Excluding the IFRS 16 impact, net cash increased by TL0.99bn q/q to TL2.25bn in 3Q22. Negative NWC increased by TL815mn q/q to TL2.38bn in 3Q22 and quarterly NWC/Sales ratio increased to -1.5% in 3Q22 from -1.2% in 2Q22. Bim realised a Capex of TL1,319mn in 3Q22, implying 3.2% of net sales.  Including IFRS 16 impact, Bim’s net debt remained flat q/q at TL7.5bn in 3Q22 despite increase in financial leasing liabilities as well as higher prepaid expenses. IFRS 16 accounting change had negative impact of TL32mn in 3Q22 versus negative impact of TL57mn on net income in 3Q21 but no effect on cash flow and management of the business as expected.