Company Report -Ttrak (Tacirler Yatırım )

Normalization in margins after record year…
We are revising our target price for TTRAK and adjusting our
recommendation to HOLD.
Following our updated macro forecasts and the 2Q24 financial results, we are
revising our 12-month target price for TTRAK to 995 TL per share. Although
our revised 12-month target price for the company indicates a return potential
slightly above the index, due to the limited near-term catalysts for the
company, we are updating our recommendation from BUY to HOLD. In our
2024E forecasts, TTRAK is trading at a 5.4x EV/EBITDA and 8.7x P/E ratio, while
in our 2025E forecasts, it is trading at a 3.8x EV/EBITDA and 4.7x P/E ratio.
Key Highlights from the 2Q Financial Performance
Net Profit Aligned with Expectations: According to the 2Q24 financial
statements, TürkTraktör's net profit for 2Q24 amounted to 1,941 million TL,
reflecting a year-on-year decrease of 12.2% (Tacirler Investment: 2,027 million
TL). This result is consistent with our forecasts. For the first half of 2024, net
profit declined by 25% year-on-year to 3,836 million TL. We project that
TürkTraktör’s net profit for 2024 will normalize to approximately 8.8 billion TL
following the record levels of profitability achieved in 2023.
Sales Revenues in Accordance with Expectations: TürkTraktör’s
consolidated sales revenues for 2Q24 were 15.67 billion TL, marking a 17.6%
year-on-year decline, which is in line with our expectations (Tacirler
Investment: 16.41 billion TL). When considering the effect of TMS 29 included
in 1Q24’s sales revenues, there was an approximate 13% decline. On the
production front, TürkTraktör’s total production in 2Q24 decreased by 10.9%
compared to the previous quarter, and by 6.7% year-on-year. We anticipate
an average production decrease of approximately 8% for the remainder of the
year. In terms of sales volume, the total tractor sales volume for 2Q24
decreased by 5.9% year-on-year. International sales volume fell by 22% yearon-year, while domestic sales increased by 4% year-on-year. On a quarterly
basis, international sales volume declined by 16.5%, whereas domestic sales
volume decreased by 9.8%.
Gradual Normalization in Operational Profitability: TürkTraktör’s EBITDA for
2Q24 decreased by 35% year-on-year to 2,885 million TL, with an EBITDA
margin of 18.4% (2Q24 Tacirler Investment Estimate: 3,197 million TL). We
forecast that the high increase in costs, particularly the persistent rise in raw
material prices and higher operational expenses, will lead to a 2% year-on-year
reduction in EBITDA margin, bringing it to 18.2% by the end of 2024.
Additionally, TTRAK's investment expenditures amounted to 1,683 million TL in
1H24, compared to 517 million TL in 1H23.


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