AGESA TI: 4Q22 Review (Oyak Yatırım)

Life line supports the results; strong financial income
Agesa posted 4Q22 net income of TL177mn (-11% q/q, +68% y/y), below both our estimate (TL208mn) and market consensus (TL226mn). Higher-than-expected operating expenses on the pension front explains our deviation. Life premiums grew 112% y/y, while pension AUM expanded 73% y/y in 4Q. Life line was strong in 4Q as technical net income rose 46% q/q. However, pension line was under pressure through higher operating expenses, which were seasonally high. Financial income was supportive of results through CPI-linker revenues. We envisage both life and pension business lines to support earnings over the next two years led by growing pensions and life premiums coupled with contained opex.
Pension assets continue to grow on higher contributions
We expect AgeSa's pension AUM to reach TL92bn in 2023, at a 3Y (2020-23E) CAGR of 46%, thanks to rising participants and its multi-channel distribution network. We think the new regulation which involves a 5ppt higher state contribution and permission for partial withdrawals support AUM growth going forward. Also, state contributions exceeding the annual state contribution limit could be collected over upcoming years. Minor enrolment (age below 18) has been active for nine months and participant numbers have been rising. According to Turkstat, there are 23 million people under 18 years old in Turkey, while private pension penetration to the whole population stood at a low 6.5% as of 22YE. Therefore, there are many factors to support pension AUM growth at the moment.
Life segment remains to be a profitable line of business
Life segment comprises 77% of revenues and we envisage life premiums to reach TL4bn in 2023, posting a 3Y (2020-23) CAGR of 48%. We forecast the life segment's profit to surge to TL1.3bn in 2023, posting a 166% y/y hike, and delivering a 3Y CAGR of 75%. We believe that life insurance line has significant growth potential in Turkey, with penetration at just 0.25% of GDP as of 22YE.
FY23E earnings and OP rating maintained
Agesa trades at 5.5x 23E P/E and 2.4x P/B with 23E ROE of 49%. Our 2023 net earnings estimate indicates 16% y/y growth. We maintain our TP at TL59.86/share, implying a huge 102% upside potential. We maintain our Outperform recommendation for the stock.
 


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