TFG Istanbul Morning Report (TFG Istanbul Menkul Değerler )

• The BIST pared the previous day’s sell-offs by closing 2.54% higher at 7601, and with a formidable turnover of TRY 175bn-as we have been observing, buying appetites coming in large vols., whereas the sell-offs occur on lower vols. of around 140k.
• The Banks rallied the BIST higher, soaring on average nearly 9%, with word on the street that Turkey was once again considering re-opening the swap market to foreign investors, followed by the Conglomerates, whereas the Mining stocks faced profit-takings after their recent surge, alongside the Aviation stocks.
• BIMAS topped the BIST30 gainers’ list, on the back of the defensive structure of the sector and hedge against inflation owing to its strong private label product portfolio and solid customer base, and was followed by the private banks, and TUPRS. TUPRS could be the next key stock to watch in correlation to the rise in Brent prices and crack diesel prices, as well as EREGL, as the worst maybe over, and yesterday’s drawbacks offered a low entry-point for the stock. The stocks that found themselves on the wrong end of the table were KOZAA-KOZAL and the Aviation stocks THYAO and PGSUS, due to profit-taking.
• This morning, we are seeing a negative and cautious trading session at the Asian markets, ahead of the US CPI figures, while we expect a positive opening at home, higher-than expected US CPI figures (Est. 0.2% m/m) in the afternoon may lead to profit-takings.
• As of yesterday’s close, the TRY has weakened against the greenback to 27.04, and is also weaker against the Euro at 29.70, while the DXY is calm at 102.46. On the Bonds’ side, the 2yr rates rose by 46bps to 16.51%, while the 10yr yields fell by 16bps to 18.43%.
• On the commodity front, Brent is trading slightly higher at USD 87.32, amid the escalating tension between Russia and Ukraine, despite the increase in US inventory stockpiles, and both ounce and gram GOLD prices are trading calm this morning at USD 1917 and TRY 1667, respectively.
• According to the internet Ekonomim website, due to the increasing number of company closures, similar to the recent Gold import tax, the government is preparing to impose a similar import taxation for automotive, textile and shoes, but may increase the SCT on autos with engine size greater than 2000cc, which would be negative especially for DOAS shares.
• According to BloombergHT, Moody’s could increase Turkey’s credit rating if the return to orthodox economic continues, which is more rule bases and predictable compared to the previous measures, however, if the new measures cause a greater-than expected slowdown in the economy, an thus a return to the old political measures, this would consequently cause for a downgrade. Please note that Turkey’s current rating at Moody’s stands a B3 “Stable” outlook.
AGENDA:
• June IP figures and Weekly Foreign STOCK/BOND holdings will be released on the local front, whereas across the pond, all eyes will be on the July CPI (+0.2%).
SECTOR NEWS:
China has liberalized the sending of tourist groups to many countries, including Turkey. Loosening travel restrictions that could boost the global tourism market and may have a boost on aviation sector stocks traded at BIST.
CORPORATE NEWS:
• VAKBN - NEUTRAL: Vakifbank posted TRY1,007mn net profit for 2Q23 that is in line with TFG’s estimate but 12% lower than consensus. The bottom line could have been even lower had the bank not reversed TRY250mn of free provisions. Quarterly annualized ROE is just 3% for 2Q23 versus 36% a year earlier and 15% in 1Q23. The P/E calculated on annualized quarterly net profit is 33x and the current P/B is at 1x. We do not attach any recommendation on state banks.
• PETKM - VERY NEGATIVE: Petkim posted an exceptionally-weaker-than-expected profit performance for 2Q23. The TRY19mn EBITDA is 87% below the consensus mean, the TRY134mn net profit is 57% below expectations. The EBITDA margin is a mere 0.2%. Softer numbers were already expected but no analyst out of the 15 expected EBITDA and net profit plummeting 99% and 95%, y-y. Due to lack of operational earnings support, the net debt/EBITDA which was already high at 10x in 1Q23, leaped to 62x. The TRY20bn net debt is pointing to the all time high indebtedness for Petkim. Lack of EBITDA also boosted the trailing EV/EBITDA multiple from 30x to 211x. Given that the Ethylene-Naphtha spread plunge from US$209 at end-June (2Q23 avg:US$282) down to an all time low US$41 as of August 4th, we can say that the worst may not be behind us yet. We recommend investors to stop their losses on existing long positions at the opening.
• KOZAL - NEGATIVE: Koza Altın’s EBITDA came in 50% below the expectations at TRY301mn for 2Q23, while the profit was in line at TRY1.5bn. While the EBITDA has contracted 55% y-y, the net profit more than doubled thanks to income from investment activities. The stock is trading at 35x trailing EV/EBITDA and 56x quarterly annualized EV/EBITDA, which are too high for our taste. We expect negative market reaction to these numbers.
• SAHOL - POSITIVE: Solid 2Q23 results with net income of TRY13.3bn that is 25% better than consensus. EBITDA margin of 30.4% in 2Q23 is significantly higher than 18.8% in the previous quarter. Compared to 2Q22; however, EBITDA margin showed deterioration from 37.1% to 30.4% in 2Q23. Combined non-bank operational cash flow increased by 8 times y-y to TRY16.6bn, driven by a significant contribution from the energy segment. The Holding's Net Debt/EBITDA multiplier is 0.5x and solo net cash position stood at TRY4.5bn after adjusting for dividend inflows/outflows and share repurchases.
• YKSLN - NEGATIVE: The company posted negative financials for 2Q23. Net sales came out at TRY139mn, 58% lower qoq and 64% lower yoy. The company posted negative EBITDA of TRY1.8mn and net loss of TRY15mn. Profitability was negatively affected by the downtrend in steel prices during the period as well as surge in raw material inventory and financing costs. Rising interest rates on the company’s outstanding debt drove interest expense up further burdening bottom line. Going forward if there is an upward trend in steel prices we expect the company to normalize its profits and sales 4Q23 onwards. It should be noted Tool steel made up 44% of sales while Carbon steel made up 32% of revenue during 1H23 compared to 46% Carbon steel and only 26% Tool steel revenue contribution during 2022, indicating successful transition in product portfolio.
• TKFEN: NEGATIVE: The company posted disappointing 2Q23 net sales of TRY8.8bn, 7.5% below expectations, and net profit of TRY496mn which lagged consensus by 10%. EBITDA, however, came out in line with estimated at TRY856mn. EBITDA margin stood at 9.7% for the quarter vs 9% forecasted.
• THYAO: Per July, traffic results the load factor for domestic flights up by 4.1 points to 94.2%. For international flights the passenger load factor decreased by 0.9 points to 84.8%. While the total number of passengers increased by 9% to 8.6 million, the load factor decreased by 0.3 points to 85.8%. In the January-July period, domestic passenger load factor decreased by 1.5 points to 83.2%. For international flights load factor increased 5.4 points to 82.2%. The total number of passengers increased by 22% to 47.3 million and the total load factor increased by 4.7 points to 82.3%. rose.

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