Growth prospects

Dünya Executive - - REPORT - Hanzade Kilickiran, analyst, JP Morgan

Ulker remains to be one of the most exciting structural growth stories in Turkey, in our view. Through further operationa­l expenditur­e control, improving price mix in Turkey and better margins in its internatio­nal operations, we believe the company will be able to boost its EBITDA margin from 13% currently to 15% in the medium term. We think the company deserves a premium here due to its superior growth prospects that have so far been delivered successful­ly by management. We forecast 27% earnings per share growth in 2017, driven largely by easing currency impact after operating profit, and partially by 10% increase in revenues that we expect. 2016 was challengin­g for Ulker with depreciati­on in the lira together with restructur­ing in revenues putting pressure on top line and bottom line. Net income declined by 21% and revenues grew by 6.5% on a like-for-like basis, below inflation. We expect Ulker to continue to face foreign exchange headwinds in 2017, but the impact should be limited as most of the lira depreciati­on that we expect has already happened in late 2016. This should mean better earnings momentum and we forecast net income to grow by 27% in 2017.

(March 31)

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