Oyak Yatırım: KCHOL – Balanced and Diversified Portfolio

A diversified, balanced portfolio with a NAV discount above historical averages and ready for the rate cut cycle… According to our current NAV calculation, Koc Holding is trading at a 37.6% NAV discount, and at a 50.2% NAV discount according to our target NAV calculation. Our target NAV calculation shows a balanced and diversified portfolio in the Automotive (42.9%), Finance
(19.7%), Energy (23.0%), and Durable Goods (5.6%) segments. Sectors such as banking, automotive, and white goods will benefit from the domestic rate cut cycle, while the recovery in economic activity in the Eurozone and the upward movement in the EUR/USD exchange rate may contribute positively to export performance.

Ford Otosan’s strong export figures are encouraging, while the Stellantis merger at Tofaş could create synergy. Passenger car, light commercial, and medium commercial retail sales figures reported by Ford to ODMD showed a total increase of 3.2% to 63,105 in the first seven months of the year. According to production and export data shared with OSD, production in the first seven months of the year increased by 18% y/y to 287,436, while exports rose by 25% to 258,047. We continue to like Ford due to strong production and sales figures, less exposure to strong domestic competition, and factors such as higher EUR/USD. Tofas has revised its 2025 domestic light vehicle market and domestic sales volume expectations upward. Revisions on expectations and the synergy created by the Stellantis merger stand out as key catalysts. Türk Traktör sold 11,282 tractors in the domestic market in the first seven months of the year, a 47% decrease y/y (2025 full-year expectation is 18,000–22,000). Exports decreased by 24% y/y to 7,064 units (2025 full-year forecast: 10,000–12,000).
While both domestic and export volumes continue to be weak, the rate cut cycle could be a catalyst in the coming period.

Following strong second-quarter results at Tupras, product margins remained robust in July and August. Factors such as the Iran-Israel tension and the impact of power outages in Spain and Portugal and refinery maintenances which caused global inventories to remain below five-year averages supported product margins in 2Q. Diesel cracks were slightly below last year’s levels (2Q25: $17.1/bbl, 2Q24: $18.4/bbl), while jet fuel cracks were above the first quarter due to the high season effect and slightly below last year’s levels
due to the high base of 2024 (2Q25: $16.0/bbl, 2Q24: $16.3/bbl, 1Q25: $14.5/bbl). Gasoline cracks, however, remained below last year’s levels due to high inventory levels (2Q25: $16.2/bbl, 2Q24: $21.5/bbl). High-sulphur fuel oil remained strong due to increased demand for complex refineries and low supply levels. We expect that the strong performance in crack margins to continue due to the strong data observed in July and August and the impact of the high season.

Banking segment accounts for 21% of our current NAV calculation. Yapı Kredi’s net profit for the first half of the year, excluding inflation accounting, increased by 31% y/y to TL 26.96 bn. Yapi Kredi keeps its 25E RoTE guidance of mid-twenties unchanged backed by 2-2.25ppt higher NIM (revised from 3ppt higher NIM) and ≥40% fee growth (revised from 25-30%). We expect 75% earnings growth for Yapi Kredi in 2025 after 57% contraction in 2024 with a 25E ROE of 23% and RoTE of 23.6%. Yapi Kredi trades at 26E P/BV of 0.8x and P/E
of 3.1x, while 26E ROE stands at 29%, on our estimates.

We maintain our “Outperform” recommendation for Sabancı Holding with a revised TP of TL 137.60/share with an upside potential of 59.9%.

Banking and Financial Services account for 41.4% of our target NAV calculation. Akbank’s net profit excluding inflation accounting increased by 3% y/y to TL 24.9 bn in 1H25. In the holding’s financials, the consolidated net loss was TL 570 mn (1H24: loss of TL 6.1 billion). Akbank changed its 25E ROE guidance of >30% to >25% mainly on revised NIM guidance down to 3-3.5% from 5%. We expect 52% earnings growth for Akbank in 2025 after 36% contraction in 2024 with a 25E ROE of 24%. Akbank trades fully at 26E P/BV of 0.8x and 3.1x P/E, on our estimates.

The Energy and Climate Technologies segment accounts for 30.8% of our target NAV calculation. Production increased in the energy generation business segment with the contribution of natural gas. Production volume reached 7.0 TWh in 1H25, a 28% y/y increase (1H24: 5.5 TWh). Of the 7.0 TWh produced, 46% came from natural gas, 20% from hydro, 11% from wind and solar, and 22% from
coal. Enerjisa Uretim completed the first half of the year with a 490 bps improvement over the same period last year, achieving a 19% EBITDA margin and 7.55 bn TL EBITDA, an increase of 99%. Higher production and higher capacity utilization, along with increased capacity payments, contributed to the improvement in EBITDA. Although financial revenues declined in energy distribution, higher capacity reimbursements and better performance in operating expenses supported the increase in distribution EBITDA. Enerjisa, which
provides electricity distribution and retail services with a 25% market share, is expected to reach 6,250 MW of installed capacity by 2028 (current: 4, 1 GW) and leveraging its existing capabilities and incentives, we expect the contribution from Sabancı Climate Technologies, which produces renewable energy in the US (790 MW current capacity (504 MW in operation, 286 MW ongoing)), to continue to
increase.

In materials technologies, domestic market conditions in the cement and rubber segments negatively impacted financials, while financing expenses weighed on net profit. In the cement segment, weak domestic conditions were offset by contributions from the earthquake zone and international operations.

Ongoing high global competition continued to affect tire reinforcement. In materials technologies, EBITDA declined by 27% and net profit by 95% y/y in 1H25, while Syria’s reconstruction, global supply and demand, and developments in commodity prices will be closely monitored for potential improvement.

We welcome the targets to increase the share of the new economy and the share of fx revenues. The company set the share of the new economy in revenues (energy and climate technologies, material technologies, and digital technologies) at ~13% in its 2021–2025 targets, while this ratio stood at 11% in the 2021–2023 figures. The foreign currency revenue share, which was targeted to exceed 30% in the 2021–2025 targets, was 20% in the 2021–2023 figures. The targets for combined revenue growth, combined EBITDA growth, Net Debt /
EBITDA, and Consolidated ROE for 2021–2025 have been achieved.

NAV is targeted to reach $20 bn by 2029. The company aims to increase NAV, which was $6 bn in 2019 and is currently $9.5 billion (our calculation is $8.8 bn), to $20 bn by 2029. Under the 2024–2029 roadmap, the company aims for WACC adjusted return of +120–150 basis points, an investment CAPEX/sales ratio of 15–20%, a fx revenue share of over 30%, and a net debt/EBITDA ratio below 2.0x.

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