Market watch (Şeker Yatırım)

Market Watch - Wednesday, November 8, 2023
Outlook:
The BIST100 Index started Tuesday on a positive trend and closed the day at 7,844.80, down 0.30%. While the Industrial Index fell 0.33%, the Banking Index lost a greater 1.13%. As we approach the end of the balance sheet period we expect the effect of share-based divergence to decrease. Selling pressure may reoccur if tension in regions of conflict increases along with the risk of a spread of hostilities. While global markets were mixed yesterday, the U.S. futures, German DAX futures, and Asian Stock Markets are negative this morning. Meanwhile, we expect statements from Fed members, economic data, and geopolitical developments to continue impacting risk appetite. The VIOP-30 Index closed the evening session up 0.47%. Locally, we expect the Benchmark Index to start Wednesday with an increase. Any subsequent pullbacks would present buying opportunities and prompt reactionary purchases. SUPPORT: 7,790 - 7,740 RESISTANCE: 7,920 - 8,015.
Money Market:
The Lira was negative yesterday, weakening 0.22% compared to the USD to close to 28.5027. In addition, the currency appreciated by 0.06% against the basket composed of $0.50 and €0.50. Meanwhile, the local fixed income markets were positive. The ten-year benchmark bond was traded within a range of 28.20%-28.91%, ending at the 28.41%, 19 bps below its previous closing.
Headlines:
With the regulatory amendment published in the Official Gazette, the practice of Summary Foreign Exchange Position Reporting to the CBRT by firms with a total cash and non-cash loan balance of TL 10 million or more is terminated. In addition, the foreign currency amounts subject to reporting in the Systemic Risk Data Monitoring System have been updated. Accordingly, firms to be included within the scope of reporting will be required to have a cash loan balance of TRY 100 million or more, or a net sales revenue/asset size of TRY 500 million or more in the previous one-year accounting period (previous implementation was a foreign currency loan liability of USD 15 million or more).
The new requirement removes the obligation for small-scale firms to report to the CBRT and extends the requirement to firms of a size that may affect systemic risk. Finally, the choice of cash loan balance or net sales/asset size instead of FX loan liabilities indicates that in the upcoming period interest rate risk as well as exchange rate risk will be closely monitored.
Company News:
Bim (BIMAS.TI; OP) reported a net profit of TRY 3,849mn (3Q22: TRY 1,775mn) in 3Q23, above our expectation (TRY 3,210mn) and the RT market average expectation (TRY 3,092mn). Despite currently high tax expenses (3Q23: TRY -1,296mn), TRY ~279mn incomes from investment funds, and solid operating profit were effective in the positive net profit realization. The net profit margin rose by 0.9pp in 3Q23 compared to 3Q22, reaching 5.2%.
The Company announced net sales revenue slightly above the average market expectation, thanks to its strong operational performance, recovery in store traffic (2Q22: 14.1%, 3Q22: 8%, 4Q22: 1.1%, 2Q23: -1.7%, 3Q23: 3.1%), and solid store openings trend in 3Q23. Net sales revenues reached TRY 74,406mn in 3Q23 on a rise of 80.7% YoY, due to greater basket size (3Q22: TRY 73,21, 3Q23: TRY 117,45) (+65.5%) and the positive effect of rising store number (number of stores at the end of 3Q22: 11,274 units, 3Q23: 12,046 - 206 new BIM Turkey store openings, 9 new BIM Morocco store openings, 9 new BIM Egypt store openings, and 4 new FILE store openings). Concluding this quarter with a 9.0% EBITDA margin, Bim registered improvement on the operational front based on “Basket Size” / “Like-for-like sales” (3Q22: TRY 42,456, 3Q23: TRY 70,253, on a 60.4% rise YoY). Duly, the Company printed TRY 6,672mn EBITDA on a YoY rise of 129.9% (Seker Invest: TRY 5,644mn, Market Avg.: TRY 5,484mn).
Growth of the domestic and international store network continued strongly in 3Q23. Bim, which specifically rivals medium-sized markets with its FILE brand, has added 4 new FILE stores to its domestic store network in 3Q23 to reach a total of 223 FILE stores. The share of File stores in the Company's total sales revenues was 5.6% in 3Q23. Online sales are equal to 5% of File's total sales as of 3Q23. In Moroccan operations, the Company continued its store openings with 9 new openings in 3Q23, resulting in a total of 668 stores. In Egypt, the Company has opened 9 new stores in 3Q23 making for a total store count of 338 stores.
2023 Expectations: The Company has revised upwards its 2023 guidance. Bim now expects sales growth of around ~80% (Previous: 75% (±5%)) in 2023. The EBITDA margin expectation is around 7.5%-8.0% (Previous: 7.0%-7.5%), including the IFRS-16. The Company expects Capex to sales at 3.2% (Previous: 3.5%) (Positive).
Pegasus (PGSUS.TI; OP) is to announce its 3Q23 results after the close of the TR markets. For 3Q23, we expect net sales of TRY 28,198mn (Research Turkey market average expectation: TRY 28,173mn), rising 58% YoY. On the EBITDA side the average market expectation is TRY 11,822mn, while our expectation is TRY 11,876mn. As a result, we expect the company to print a net profit of TRY 6,922mn (market expectation: TRY 6,882mn).
Petkim (PETKM.TI; MP) has announced a net profit of TRY 2.417mn for 3Q23 (3Q22: TRY 1,495mn net profit +62% YoY), above the the market estimate of TRY 1,059mn and our estimate of TRY 1,318mn. In 3Q23, sales revenues and EBITDA were at TRY 13,189mn (3Q22: 14,200 -7% YoY) and TRY 1,233mn (3Q22: TRY 686mn +80% YoY). Our expectation was for TRY 13,671mn of revenues and TRY 1,259mn EBITDA, while the market expected TRY 13,161mn of revenues and TRY 938mn EBITDA.
Sabancı Holding (SAHOL.TI; OP) is set to announce its 3Q23 financials today after the market close. We anticipate quarterly net profit of TRY 13,829mn (3Q22: TRY 10,873mn net profit, +27% YoY), while the market average expectation is for a TRY 12,933mn net profit.
Turkcell (TCELL.TI; OP) achieved a net profit of TRY 5,478mn (77% up YoY), in parallel with our expectation of TRY 5,272mn and above the market expectation of TRY 3,275mn. TRY 3,275mn of net financial expenses guided net income negatively, while the stronger gross profitability, control of operational expenses and TRY 1,226mn income from investment activities supported net profit. The net profit margin rose to 21% (2Q23: 15%, 3Q22: 16%).
Strong rise in ARPU and net subscriber adds support revenues... Thanks to successful price adjustments the company booked TRY 25,933mn in revenues, somewhat below our TRY 26,529mn estimate and the market’s TRY 26,094mn estimate. ARPU has increased 84% YoY in the mobile segment. A net 586 thousand mobile postpaid subscribers were added in 3Q23. Average monthly data usage per user also rose by 14% YoY with 18GB.
Company booked TRY 11,251mn EBITDA, up 43% YoY... Our expectation was at TRY 11,363mn and the market expectation was at TRY 11,261mn. The EBITDA margin was 43%.
Financial expenses remained a pressure point... In 3Q23, foreign exchange expenses continued to pressure net profit due to foreign currency-denominated debt. A total 3,275mn TL financial expense was realized. Nonetheless, Turkcell’s net debt position slightly declined to TRY 30,977 in 9M23 from TRY 31,724mn in 6M23. On the other hand, net debt/EBITDA declined to 0.9x from 1.1x indicating there isn’t a serious debt issue.
2023 guidance revised... The company expects revenues to rise by 73% (Previous: 71%), EBITDA in the vicinity of TRY 39bn (Previous: TRY 37bn) and operational capex/sales of 22% in 2023. With this revision, the indicated EBITDA margin also increased from 40% to 42%.
Zorlu Energy’s (ZOREN.TI; MP) net profit increased to TRY 136mn in 3Q23 from TRY 48mn in 3Q22 (no market estimate). Net other operating income rose to TRY 2,386bn in 3Q23 from TRY 320mn in 3Q22 due to the increased privileged service receivables index difference, supporting the bottom-line. However, net financial loss rose to TRY 2,137mn in 3Q23 (from TRY 1,516mn in 3Q22) due to fx loss and interest expenses. Also the deferred tax loss was realized at TRY 1,097mn in 3Q23 (vs. a deferred tax gain of TRY 11mn in 3Q22), negatively affecting the bottom line. The top line fell 1% YoY to TRY 7,675mn in 3Q23 from TRY 7,791mn in 3Q22 due to decreased spot electricity prices and natural gas prices. On a yoy basis, the spot price was still down by 32% due to lower gas prices, which fell 36% yoy. The 3Q23 EBITDA of TRY 1,737mn (excl. other operating income and expenses) was up 6% YoY. The gross margin rose by 1.3pp YoY to 19.4% in 3Q23 on decreased COGS, while the EBITDA margin rose by 1.5pp to 22.6%. Zorlu Energy's financial debt fell to USD 1,433 million as of 9M23 (from USD 1,460mn in 1H23) due to a 100% rights issue in early July. The debt/EBITDA ratio was realized at 3.6x (4.3x in 1H23 and 3.8x in YE22).

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