Coca Cola Icecek (CCOLA): The Bottom Is Near

First Quarter Results Update: In the first quarter revenues declined by 3.9%, despite strong sales volume growth of 13.4% YoY (Türkiye +8.4%, International +16.1%). This was because the Company has been making price investments since the second half of last year, and has been gaining market share since then. Naturally, this also pressured profitability with Türkiye reporting a quarterly EBITDA loss of TL345m (vs a loss of TL237m a quarter ago). Internationally, EBITDA contracted by 10.6% YoY to TL4,422m.

Outlook and Guidance: As mentioned in our previous reports, the aforementioned trend was largely expected by us since H2 2024. On the other hand, we also expected a recovery in margins and cash flow in H2 2025, and this is still intact, with an even stronger follow through i2026. For 2025, the Company expects “mid-single-digit volume growth, FX-neutral Net Sales Revenue growth of low 20s, and a flat EBITDA margin.

Our estimates and Financial Analysis: Firstly, we are maintaining our estimates for 2025 despite the weak first quarter as we have been on the conservative front. Our estimates remain more conservative than the guidance. Our revenue estimates are in line with guidance, while our EBITDA margin estimate is 90bps lower. As SKU and operational expenses are exceptionally managed, and raw materials costs are effectively hedged, it could provide an upside to our numbers by the year end. Our assumption of higher costs and real product price declines for some part of 2025 is the key reason for our margin contraction assumption. Going forward, we assume a 17.3% sustainable EBITDA margin for the business, in our model, leaving room for potential upgrades. Net debt should remain low thanks to superior WIC management. The net debt to equity ratio should remain in the 1.1-1.4x range.

Fair value estimate maintained at TL85.3/share, indicating 65% upside potential. Coca Cola Icecek trades at 53% discount on 2025E EV/EBITDA multiple and 49% discount on 2025E P/E ratio compared to its global peers. The real EBITDA growth rate could lag the global peers in 2025, but on our 2026 estimates the trend should be the other way around (Exhibit 2).All in all, we believe margins have bottomed out, the low cycle is priced in, and a H2 2025 improvement could be a medium-term catalyst for the stock, following a 1 year underperformance of 14%.