Company Update Report: Arçelik (ARCLK)

We upgrade our rating from Marketperform to Outperform and raise our target price by 14% to TL180/share, which implies a 60% upside potential. We expect margin recovery to take place in the upcoming period supported by ongoing cost cutting actions and improving international demand (see page 2). Following the 33% fall in the last 12 months with a 30% underperformance to BIST-100 index, Arçelik shares trade at 49% and 42% discount on 2026E EV/EBITDA and P/E multiples compared to its global peers.

1Q25 Results Update: In 1Q25 net sales increased by 9% y/y to TL109bn. Domestic sales declined by 12% while Asia-Pacific sales fell by 15%. Europe sales increased by 49% y/y supported by the inorganic contribution of the Whirlpool merger (+EUR650mn). Africa sales also grew by 18%. Consequently, Europe’s share of total sales increased from 34% in 1Q24 to 47% in 1Q25. Despite lower raw material costs, EBITDA decreased by 27% y/y to TL5.7bn due to higher personnel expenses and low CUR. A net loss of TL1.6bn was reported. Net debt rose by 20% q/q, reaching TL115bn mainly due to the increase in working capital, while Net Debt/EBITDA ratio rose from 3.9x at 2024YE to 5.1x as of 1Q25.

Deleveraging and recovery in margins are in sight: With the Whirlpool merger, Arçelik raised its market share to mid-20% in Europe. Although the European market has been contracting over the past two years, margin compression intensified last year due to rising post-merger costs and the adverse effects of IAS-29. This trend is anticipated to reverse in upcoming quarters, with early signs of stabilization already being visible. EBITDA margin was up by 82bps q/q to 5.3% in 1Q25. We expect a gradual normalization in margins beginning from 2Q25 driven by cost efficiency programs, favorable EUR/USD and lower raw material costs. Our EBITDA margin estimate for 2025 is 6.2%, rising to 7.5% in 2026 and 8.3% in 2027. With operational improvements, we foresee the Net Debt/EBITDA ratio to decline to 3.4x by year end.

Outlook and Guidance: 2025 guidance was maintained after 1Q25 results. Domestic sales are expected to remain flat in real terms, while international sales are guided to grow by 15% in FX. EBITDA margin target is 6.5% (2024: 5.2%, 1Q25: 5.3%), and NWC/Sales is expected to remain below 20%. Capex guidance stands at EUR300mn. To be conservative, we foresee a 5% y/y decline in domestic sales in real terms, 14% increase in international sales in EUR terms and 6.2% EBITDA margin for 2025FY. The impact of margin recovery is likely to become more visible for the rest of 2025 and throughout 2026 supported by better in domestic conditions.

Gedik Investment Research