Net income of industrial companies rise after strong operational performances
Turkey’s biggest industrial companies continue to release their financial results for the third quarter of 2017. The results almost exceed the estimates on the back of strong operational performances despite financial turbulence in the country. However, real estate and energy companies continue to underperform due to lower economic confidence and FX expenses.
►Sabanc Hold ng’s strong prof ts surpr se market consensus
Sabanci Holding announced a net profit of TRY 881 million (+64% year-on-year) in its consolidated 3Q17 financials, exceeding estimates by a wide margin (consensus: TRY 725 million). The deviation from estimates mainly stemmed from the stronger than expected contribution of banking and industrial segments and lower-than-expected financial expenses. The consolidated topline grew to TRY 10.5 billion (+25% year-on-year), while the consolidated EBITDA increased to c. TRY 2.32 billion (+33% YoY).
As the largest unlisted asset in the portfolio, Enerjisa recorded a net profit of TRY 57 million in 3Q17 compared to a net loss of TRY 37 million in 3Q16 on the back of stronger operational performances and lower financial expenses year-on-year. Enerjisa reported TRY 777 million of unadjusted EBITDA (+52% yearon-year) in 3Q17 on the back of increasing RUB, higher generation capacity and utilization of feed-in tariff. Accordingly, Enerjisa’s 9M17 unadjusted EBITDA reached TRY 2.14 billion (+29 year-on-year). We believe there is an upside risk to the management’s conservative 10-15% 2017 EBITDA growth guidance for Enerjisa.
►Koc Hold ng’s net ncome worse than expected after poor Tupras contr but on
A weaker than expected profit contribution from Tupras may have a slight negative impact as Koc Holding announced a net profit of TRY 1.29 billion (+32% year-on-year) in its consolidated 3Q17 financials, slightly lower than the consensus estimate (TRY 1.33 billion). The stronger-than-expected contribution of autos and banking were canceled out by the weaker-than-expected contribution Tupras.
Tupras announced a net income of TRY 992 million in 3Q17, much worse than the consensus estimate of TRY 1.35 billion, compared to a net income of TRY 581 million in 3Q16. The company recorded a net refining margin of $8.95/bbl in 3Q17 compared with $5.68/bbl in 3Q16. Meanwhile, Med-Complex’s gross refining margin was $6.45/ bbl in 3Q17 compared with $3.81/ bbl in 3Q16. It recorded an inventory gain of $0.65/bbl in 3Q17 compared with an inventory gain of $0.04/bbl in 3Q16. Excluding inventory impacts, the company had a clean net refining margin of $8.3/bbl in 3Q17 compared with $5.63/bbl in 3Q16. One-off effects due to supply disruptions were very effective throughout August and early September but their effects vanished at the end of the quarter, slightly weakening the margins. However, a healthy demand environment in Europe and the US continued to support refining throughout the quarter.
►M gros posts strong results w th upward rev s on n gu dance
Migros announced a net loss of TRY 70 million in 3Q17 (cons: net loss of TRY 95 million) compared with a net loss of TRY 1 million in 3Q16. Despite the strong topline growth with robust operational margins, the year-on-year deterioration of the bottom-line resulted from higher FX losses on depreciation of the lira against the euro. Migros reported TRY 4.29 billion of revenue in 3Q17 in line with estimates suggesting a significant year-on-year growth of 39.1% thanks to the sound LfL growth and contribution of Kipa. Topline growth without Kipa was also robust at 20.1% year-onyear in 3Q17. The gross margin increased to 27.3% in 3Q17 from 26.9% a year ago. The management revised up its guidance for the second time this year. Accordingly, including Kipa operations, the management now expects sales growth of 38% (prev: +35%) on the back of the strong performance of existing Migros stores with an EBITDA margin guidance of 5.5% (prev: 5-5.5%). The new store opening guidance remained unchanged at 180+. Migros opened 151 new stores in 9M17.
►BIM’s ncome exceeds est mates w th strong operat onal results
BIMAS announced net income of TRY 227 million in 3Q17 (+32% year-on-year), higher than estimates (cons: TRY 208mn) on the back of strong topline growth and robust operational margins. Revenue reached TRY 6.26 million in 3Q17, up 24% year-on-year, thanks to the increasing number of stores, robust 12.1% LfL basket growth and 1.3% LfL customer traffic growth. The topline was roughly in-line with estimates (cons: TRY 6.18). EBITDA came in at TRY 343 million (+30% year-on-year) in 3Q17, 9% higher than market estimates (cons: TRY 315 million) thanks to the strong margins. The gross margin increased to 17.4% in 3Q17, up from 17.2% in 3Q16 while the EBITDA margin reached 5.5% this quarter compared to 5.2% a year ago (IS Inv: 5.1%, cons: 5.1%). The number of stores increased to 6,037 (from 5,947 in 2Q17) in Turkey and to 635 (from 613 in 2Q17) abroad in 3Q17. Following the strong results, the management kept its guidance unchanged
►Ulker del vers sl ghtly more than est mates pred cted
Ulker announced net income of TRY 64 million in 3Q17, up 17% yearon-year. The deviation primarily stemmed from a better-than-expected EBITDA margin in 3Q17. Domestic sales volume increased by 9.4% in 2Q17 mainly due to a low base impact base in 3Q16 where Turkey sales volume contracted by 6.3% year-on-year, while international sales volume grew by 18.7% year-on-year in 3Q17. Consolidated level sales volume was up by 11.6%.
Consolidated sales revenue increased by 20% year-on-year in 3Q17 driven by sales price increases and volume growth. The share of international operations reached 26.4% in 3Q17, slightly better than estimates (Is: TRY 126 million, cons: TRY 128 million), EBITDA stood at TRY 137 million in 3Q17, implying an EBITDA margin of 13.5% in 2Q17 compared with 13% in 3Q16. Overall, sales volume growth and the EBITDA margin were stronger than expectations in the quarter.
►Pegasus’ net prof t above est mates thanks to super or operat ng performance
Pegasus Airlines posted a net profit of TRY 537 million, above the consensus estimate of TRY 507 million in 3Q17 – up by a massive 121% over TRY 243 million in 3Q16 thanks to
superior operating performance on the back of higher domestic and international yields as well as strong pax growth. In-line with estimates (cons: TRY 2.01 million), revenue came in at TRY 2.05 million in 3Q17, up 50% year-on-year. Also, meeting our house call of TRY 767 million but higher-than-consensus estimates of TRY 712 million, EBITDA was realized at TRY 768 million in 3Q17, up 92% year-on-year.
Upward rev s on n company gu dance
The company revised up its total pax growth guidance to 12-14% from the previous 11-13% for 2017. ASK growth remained unchanged at 8-10% for 2017. The previous guidance of 3-4ppt improvement in the domestic load factor and 5-6ppt increase in the international load factor was revised up to 4-5ppt and 7-8ppt for 2017, respectively.
►H gher coverage, lower CPI-l nker ga ns we ght n Vak fbank’s results
Vakifbank posted solo net earnings of TRY 701 million in 3Q17, down 22% on a quarterly basis but strongly up 47% on annual comparisons. The bank’s RoAE retreated to 12.8% from 17% in 2Q17. Results were 4% lower than the market expectation of TRY 736 million. The NI would have been TRY 910 million, if the bank had not raised its coverage to 86% from 83% a quarter ago. As expected, CPI-linker gains nosedived in 3Q, resulting in c. 65 bps contraction in NIM, which would have been 4.1% if the bank employed pro-rata accounting for CPI-linker yields in lieu of booking based on actual figures. Fee income momentum was sustained even faster in 3Q17, leading to its best ever quarterly results with fees-to-total-revenue reaching 14%.
Reported NIM was 85bps lower, but adjusted (normalized for CPI linkers) down by only 20bps. Customer loans posted 4% quarterly, slightly exceeding sector averages. TRY loans, spearheaded by consumer loans, drove loan book growth. The bank also strengthened its deposit base by growing 2% on a quarterly basis owing to strong growth attained in previous quarters and strong prints in wholesale funding. Higher TRY funding costs and lower CPI-linker yields resulted in 65bps margin contraction, which will largely be recouped in 4Q through TRY 350 million additional income from CPI linkers. Hence, the management retained its NIM guidance for 2017 from flat to slight contraction to a 10-15bps improvement.
►Tofas sales flatt sh but h gh pr ces contr bute to revenue
Tofas (TOASO) reported a net profit of TRY 284 million in 3Q17, up 35% year-on-year, driven by superior operating performance. Broadly in line with estimates (consensus: TRY 4 billion), revenue grew to TRY 3.9 billion in 4Q17, up by 22% yearon-year. Above expectations (consensus: TRY 386 million), EBITDA came in at TRY 443 million in 3Q17, up 47% year-on-year, ahead of topline growth.
Tofas attained 22% topline growth, primarily driven by better pricing in the domestic market and a positive currency impact on export revenue as total sales volume remained almost flattish at 84,000 units. Export revenue surged to TRY 2.4 billion in 3Q17, up y 8% year-on-year, thanks to a weak TRY despite a 13% decline in export volume to 53,000 units. Domestic revenue grew to TRY 1.5 billion in 3Q17, up 57% year-on-year, driven by a 39% volume increase to 31,000 units and increase in domestic vehicle prices. Indeed, per vehicle domestic revenue surged by 13% on a yearly basis. Tofas increased its domestic market share to 12.9% during 9M17, up by 2ppt year-on-year thanks to successful Agea sales performance. In 9M17, the company’s domestic sales volume grew to 81,000 units, up 11% year-on-year, and export volume increased to 207,000 units, up 6% year-on-year.
Downward rev s on n 2017 year-end export gu dance
Tofas revised up its 2017 yearend domestic sales volume guidance to 120,000-130,000 units from a previous 115,000-125,000 units on the back of its higher domestic LV market assumption of 950,000-970,000 units (previous: 920,000-940,000). On the other hand, export volume guidance was revised down to 280,000-300,000 units from a previous 300,000330,000 units. Tofas books takeor-pay accruals when its export orders fall behind minimum contract amounts, boosting its EBITDA margin. Accordingly, production volume target was cut to 380,000400,000 units down from 400,000440,000 units. Previous cap-ex guidance of 150-200 million euros was cut to 150-170 million euros. Downward revision in 2017 yearend export guidance might overshadow successful 3Q17 results, beating expectations.
►Tekfen ga ns favor agr - ndustry but d sappo nt contract ng segment
Tekfen Holding reported a net profit of TRY 131 million in 3Q17, up from a net loss of TRY 12 million in the same period a year ago, slightly lower than the market estimate (consensus: TRY 136 million). Despite the stronger-than-expected margins in the agri-industry segment, the bottom-line fell short of estimates due to the lower-than-expected topline contribution of the contracting segment and lower profitability of the real estate segment due to a delay in delivery of some residential units in the Esenyurt Housing Project.
The holding’s revenue came in at TRY 1.73 billion, up by a solid 77% year-on-year in 3Q17, on the back of strong contributions of both contracting and agri-industry segments and realized roughly in line with the estimates (consensus: TRY 1.69 billion). Consolidated EBITDA came in at TRY 185 million in 3Q17, in line with the market estimate (cons: TRY 188 million), up by a significant 350% year-on-year, thanks to robust topline growth and high margins in both contracting and agri-industry segments.
The contracting segment recorded TRY 1.13 million in revenue, showing a 72% year-on-year increase thanks to the strong project delivery on the back of a historically high backlog. The segment EBITDA rose to TRY 95 million, up from a very low base of TRY 1 million a year ago thanks to the lack of provision for the Qatar motorway project in 3Q16. Accordingly, the EBITDA margin realized at a robust 8.4% in 3Q17. Including the profit contribution of equity accounted subsidiary Azfen’s projects, the EBITDA of the segment realized at TRY 107 million with a robust margin 9.5% in 3Q17.
►Akenerj ’s net loss worse than expected after h gh FX expenses
Akenerji announced a net loss of TRY 131 million in 3Q17 compared to a net loss of TRY 147 million in 3Q16. The announced figure is worse than the consensus net loss expectation of TRY 112 million. On the other hand, EBITDA of TRY 44 million in 3Q17 beat the consensus expectation of TRY 28 million. The announced EBITDA figure is more than double last year’s figure of TRY 14 million. The main deviation between the actual figure and the estimate comes from a higher sales volume.
Supported by h gher sales volume and sales pr ces
3Q17 revenue of TRY 530 million was up 48% year-on-year thanks to an increase in sales volume and sales price. Its total sales volume signaled a growth of 52% year-onyear to 3 billion kWh in 3Q17. The year-on-year improvement comes from a higher sales volume, mainly from Egemer NGPP and higher spot electricity tariffs. The spot electricity tariff was TRY kr17.27/ kWh in 3Q17 from TRY kr15.31/ kWh in 3Q16.