ALKIM 1Q23 Review(Oyak Yatırım)

Underpinned by weak paper segment results

Alkim Alkali Kimya (ALKIM) posted a net profit of TL58mn (-50% y/y, -51% q/q) in 1Q23, below both market consensus (TL126mn) and our estimate (TL111mn). EBITDA came in at TL84mn, decreased by 48% y/y and 51% q/q, was also significantly below market consensus (TL175mn) and our estimate (TL154mn). Revenues were TL628mn in 1Q23, up by 15% y/y but down by 16% q/q and were below market consensus (TL751mn) and our estimate (TL715mn). The main reason for the deviation was the worse-than-expected 1Q23 ALKA results (ALKIM’s 80% subsidiary). Note that Alkim Kagit’s (ALKA) 1Q23 net profit was TL21mn, declined 82% y/y and 72% q/q and EBITDA was TL21mn, down by 79% y/y and 75% q/q. Net cash increased by 70% q/q to TL288mn, thanks to lower net working capital requirement. Accordingly, net debt/EBITDA decreased to -0.4X (2022: -0.2X).

The mediocre outlook in paper segment continued, which weighed on profitability… The domestic paper market faced severe competition that the Company and other players had to make negative price adjustments. As a result, ALKA faced a significant EBITDA and net profit drop in 1Q23. Note that Alkim Kagit’s (ALKA) 1Q23 net profit was TL21mn, declined 82% y/y and 72% q/q and EBITDA was TL21mn, down by 79% y/y and 75% q/q.

Tonnage dropped in chemicals segment y/y…
On the chemicals front, the Company generated TL62mn EBITDA which is up by 4% y/y but down by 27% q/q. The Company sold 87k ton sodium sulphate in 1Q23 (1Q22: 105k ton), and 44k ton salt products (1Q22: 63k ton). Going forward, we expect sulphate sales to increase as the Company solved its supply chain issues on importing potassium chloride. We expect potassium sulphate sales to contribute USD15-20mn to 2023YE sales.

Net cash position improved q/q
Net cash increased by 70% q/q to TL288mn, thanks to lower net working capital requirement. Accordingly, net debt/EBITDA decreased to -0.4X (2022: -0.2X).

TP and estimates changed; Marketperform rating maintained… We reduced our 23E EBITDA and net income projections for ALKIM to TL602mn EBITDA (previous: TL735bn), and TL547mn net income (previous: TL662mn). Accordingly, we lowered our target price to TL30.00/sh (from TL42.00/sh). We keep our Marketperform rating. The stock trades at 6.3x EV/EBITDA and 7.2x P/E multiples on our 2023 forecasts.
 


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