Credit Suisse Pegasus recommendation:  Decent outlook for the high season, OUTPERFORM

We revise our 2023 EBITDA margin estimate slightly higher ahead of 2Qs (to 35.2% from 33.5%). Our positive EBIT is largely offset by leasing costs and higher tax rate assumptions at the bottom-line. We continue to like PGSUS on valuation, the company’s high share of FX-based revenues and management’s successful growth execution while holding up margins. We reiterate our Outperform rating with a new TP of TRY848 (from TRY683.80 previously).

2Q preview: In light of pre-reported pax numbers, we look for 1) -7% pax yield/km yoy (EURs), which assumes a resilient trend against 27% capacity increase within the quarter and potential TRY dilution from domestic routes, 2) -12% unit cost (CASK), including +5% ex-fuel; the spread largely due to the favourable decline in jet fuel-to-Brent cracks lately.


BoFA on Turkish banks:  The Great Normalization – Buy private  banks

We do not expect a major change to FY guidance post results, though we are c.5.2ppt  above the minimum of the 30%+ EBITDA margin outlook.

Revisions: CSe 2023E earnings estimate: EUR468m (1% below previous EUR474m). We reflect lower jet fuel cracks and ongoing strength in the high margin ancillary revenues. We add higher FX-gains potentially in 3Q given EUR:US$. Our +3% EBITDA increase for ’23 is balanced by our conservative leasing interest and tax assumptions, leaving potential upside to earnings. We convert our EUR-based valuation into TRY with a higher forward-EUR:TRY estimate of 32 (vs 26 previously given recent EUR appreciation).


Catalysts: Completion of a second runway at the main hub (SAW Airport) (CSe: 4Q23). 2Q results due 14-Aug, followed by 3Q results on 8-Nov, where QTD trends in EURUS$ indicating potential FX gains on top of the positive seasonality of the quarter.

Risks include the main competitor, THY, expanding its low-cost brand’s presence at SAW, a reversal in the recent tightening of jet fuel-vs-Brent cracks.

Valuation: On our revised earnings and EUR:TRY estimates, the shares are at 5.0x our 12M-forward P/E.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.