Penguen Gıda (TFG Istanbul Menkul Değerler )

Penguen Gida produces preserved canned/bottled vegetable and fruit products and frozen fruits and vegetables. The company also caters to the HoReCa sector in Turkey and the company’s main export markets are western Europe and United States. In the international market, its main export client is the German discount store LIDL. We like the company for its more than doubling revenue growth, expanding exports which currently make up 65% of top-line, hard currency pricing vs TRY costs and low demand elasticity that creates a hedge against inflation.

Penguen sells its products in Turkey under its own Penguen brand as well as under private labels and supplies to the HoReCa sector as well. c80% of domestic sales are made to local market chains and the remaining are sold to mid-sized retailers and mass consumption channels. Under frozen segment, main items are peas, green flat beans, sweet corn and spinach, all sold to the Turkish HoReCa sector. Canned peas, sweet corn, pickles, tomato paste and jams are main items sold in domestic market which are sold under both private label as well as under Penguen brand. BIM supermarket is one of Penguen’s main client in the domestic market, more than 50% of jam produced by Penguen is sold to BIM. 90% of Pickles produced are sold as exports and almost all under private label for German discount store LIDL store. Canned food is sold in both domestic and international markets.

Through capital increase in 2020 Penguen Gida not only successfully liquidated its debt burden but also managed to increase sales aggressively and achieve economies of scale. Penguen’s sales grew aggressively and capacity utilization rate jumped from 42% of 2019 to 62% in 2021. Gross profit margins enhanced from 13% of 2019 to 25% in 2021 and opex to sales ratio also improved from 13% of 2019 to 8% in 2021 which lead to significant surge in EBITDA margin which jumped to 18.9% in 2021 from 2019 levels of 3.1%. 9M22 gross profit margin stood at 28.25% vs 9M21 gross profit margin of 17.93% while 9M22 EBITDA margin was 19.96% vs 10.25% of 9M21.

The company posted a net loss of TRY0.4mn for 3Q owing to input cost surge in TRY terms versus stable EURTRY. Also, additional working capital needs in the harvest season lifted up working capital needs. We believe that margins will be restored from 4Q22 onwards as EURTRY goes north, which will support export margins. While we are envisaging a q-q recovery for 4Q, the relief is likely to become visible from 2023 onwards as inflation decelerates. We expect 18% EBITDA margin to be sustained on the back of enhanced efficiencies, free market exchange rate and normalized inflation. We believe the stable FX revenues, diversified client portfolio and improved margins post 2020 capital increase will continue. We expect the company’s sales to continue expanding due to high global inflation and demand for processed food.

We issue a BUY recommendation for Penguen with a target price of TRY12.55/share representing 86% upside potential. Currently Penguen is trading with 9M22 EV/EBITDA of 9.55 which is at a discount of 21% relative to its peers.


 TFG Istanbul Menkul Değerler A.Ş.
  www.tfgistanbul.com/arastirma-raporlar
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