KLKIM TI 4Q22 Review (Oyak Yatırım)

For 4Q22, Kalekim Kimya (KLKIM) posted net profit of TL242mn, beating the consensus estimate of TL106mn and our estimate of TL104mn mainly thanks to the better-than-expected operational results and TL64mn tax income. EBITDA came in at TL158mn, 21% higher than the consensus estimate. Top-line reached TL724mn in 4Q22, also above the consensus estimate of TL651mn.

Strong top-line growth… Revenues were up by 174% y/y and 29% q/q, respectively. Domestic sales volume contracted by 20%, but export volume grew 15%. Despite the contraction in domestic volume, gross domestic revenues constituted 65% (3Q22: 64%) of total gross revenues, thanks to Lyksor effect which has mainly domestic customers. Export front was stronger than our expectation, growing 19% in the last quarter mainly thanks to strong demand from Iraq. Annual net revenues reached TL2.14bn netting %165 growth y/y.

Margins were better-than-expected… Gross margin was 36.5% (3Q22: 34.0%, 4Q21: 37.9%), slight dilutive effect of Lyksor was seen (without Lyksor 38), and grew by 248 bps q/q, attributable to decreasing raw material costs. 4Q22 EBITDA grew 193% y/y and 48% q/q constituting an EBITDA margin of 21.8% (3Q22: 19.0%, 4Q21: 20.4%). Opex-to-sales ratio was under control, coming in at 16%, same as previous quarter (4Q21: 20%). Margins also benefitted from increasing sales of more value-added products such as paints and insulation products. Annual EBITDA realized as TL452mn, increasing by 184% y/y.

Net cash position improved further… The company's net cash position increased by 71% q/q to TL464mn, and net debt/EBITDA realized as -1.0x vs -0.8x in 9M22.

The company shared its guidance for 2023… The management expects 55-70% growth in revenues, single-mid tonnage growth domestically and 10-15% tonnage growth internationally. EBITDA margin expectation is roughly 20%, and TL400-500mn CAPEX is expected to be made. Lastly, NWC/Sales ratio is expected to be around 10-15%.

We maintain our Outperform rating with a new target price of TL68.01/share… We revised our 2023E projections for KLKIM as TL 3.54bn (prev. TL3.28bn) revenue, TL707mn (prev. TL590mn) EBITDA and TL601mn (prev. TL526mn) net income. Thus, we raise our target price to TL68.01/share from TL62.89/share, which offers 25% upside potential from current market levels. We keep our Outperform rating for the shares.


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