AKGRT Company Update (Oyak Yatırım)

EPS set to recover in 2023
We expect earnings to rise from TL795mn (previous: TL432mn) in 2023 from TL217mn (previous: TL234mn) net loss in 2022, while the 3Y EPS CAGR (20-23E) stands at a high 21%. 2023 earnings should be positively affected from rising prices of insurance policies across the board on the back of high inflation, elevated labor costs and depreciated TL against USD. We do not foresee technical line yielding profit in 2023; yet the combined ratio is set to fall to as low as 23E 117% from 22E 141% as rising policy prices should be able to offset most of future claims. We also foresee an average investment yield of 33% for 2023, which has an upside risk to go well beyond that on portfolio reallocation to higher yielding assets such as Eurobonds and off-shore deposits. We expect ROE to increase to an eye-catching 28% in 2023 from 22E nil, while we pencil in a long-term ROE of 29% for Aksigorta. We increase our TP to TL4.52 from TL2.26 on the back of strong growth potential post 163% rights issue and strengthened capital, improved combined ratio forecast on rising policy prices and decreased market share in MTPL, and potentially higher investment yield on growing portfolio size and reallocation to high yielding assets (refer to Page 3 for details). We upgrade our rating for the stock to “Outperform” from “Marketperform”.
Market share loss in MTPL margin accretive in the medium term
Technical line has been in the red so far in 2022 due to elevated claims from motor segment post Covid-19 era, impact of hikes in minimum wage rate and high auto spare part costs on local currency depreciation. Yet, policy prices have risen significantly so far in 2022, while MTPL (motor third party liability) prices keep rising 4.5% per month post 20% one-off increase in September. Increase in the discount rate used for liability insurance products from 14% to 22% also helped Aksigorta to cover some of its loss in the motor segment. Above all, Aksigorta achieved to decrease its market share in MTPL to 6.75% as of Sept’22 from 9.45% a year ago and we expect it to fall below 5% over the coming quarters, which we think good for underwriting margin in the medium term.
Investment portfolio grows; reallocation to high yielding assets
Aksigorta has an investment portfolio of TL6.5bn as of Sept’22, in which Eurobonds, government bonds and off-shore deposits have an c80% share. Besides, Aksigorta has $200mn of FX position, which makes the company to be less vulnerable to likely depreciation in the lira. We foresee 45% y/y growth in net investment income in 2023.
Attractive valuation; capital buffers strengthened
Aksigorta trades at 6.3x 2023E P/E and 1.5x P/B on 3Y EPS CAGR (2020-23E) of 21% and 23E ROE of 28%. We foresee a dividend of TL0.17 per share from 2023 profit, indicating a yield of 5.5%. Aksigorta strengthened its capital by finalizing a rights issue of 163%


Oyak Yatırım Menkul Değerler A.Ş.
                                   ***
                               Yasal Uyarı
 
 Burada yer alan yatırım bilgi, yorum ve tavsiyeler yatırım danışmanlığı kapsamında değildir.Yatırım danışmanlığı hizmeti ; aracı kurumlar, portföy yönetim şirketleri, mevduat kabul etmeyen bankalar ile müşteri arasında imzalanacak yatırım danışmanlığı sözleşmesi çerçevesinde sunulmaktadır.Burada yer alan yorum ve tavsiyeler, yorum ve tavsiyede bulunanların kişisel görüşlerine dayanmaktadır.Bu görüşler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabılır.Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.