Entering “double-digit PBT” era. The key message from the FY21 results webcast (held on 4 Feb) was, in our view, management’s revised sustainable PBT margin
guidance of “double-digit” from previously “at least 8%”. FY21 closed with a PBT margin of 11.8%, pointing to 400bps improvement y-o-y, which, according to management, was the equal result of temporary and permanent factors. Macro volatility (accelerated FX strength, especially in 4Q21) was cited as the main temporary factor that pushed up export margins last year. Permanent factors (at least in 2022) range from a notably more profitable domestic operation (Tofas products having become more affordable/competitive; shifts in sales mix), cost-efficiency measures, and take-or-pay compensation. Tofas saw a 10% total sales volume decline last year. With a more complete model offering (the launch of automatic and hybrid versions in its passenger car portfolio), we look for 12% sales volume growth this year (9% in Turkey, 16% in exports) and 160bps PBT margin contraction, at 10.2%. This overall leads us to revise up our 2022e PBT by 22% to grow 40% y-o-y.
Awaiting announcement of new models. Tofas management shed little light on new model projects during the 4 Feb webcast and reiterated that talks with Stellantis (STLA, EUR17.37, Buy) continued on multiple scenarios, and that the aim was to get all projects on the table approved so that the Bursa plant utilises its entire capacity in future. A key message however was that all projects would be announced within 2022, with some likely in H1 (perhaps in Q1). The timeline remains dependent, in our view, on the CMD that parent Stellantis will hold on 1 March, on the strategy roadmap. We continue to assume total production volumes above 450k from 2026, vs 257k we project for 2022, up from 229k in 2021.
Raise target to TRY114.90, reiterate Buy. With new estimates (2022-23e average revenue and PBT revised up by 3% and 28%) and despite a higher WACC (17.2%
from 15.0% due to CoD and debt/equity revisions), our DCF model yields a higher new TP of TRY114.90 (from TRY104.20), based on which we reiterate our Buy rating. Shifts in the capex schedule and overall lower capex assumptions also contribute to our new TP. We expect new model investments to peak in 2023-24e (we pencil in EUR700m in total). Despite the new investment cycle, we look for uninterrupted dividend payments (partly due to strong balance sheet) and look for 2021-22e yield of 6.0%/6.5%, assuming pay-outs of 75%/60%, respectively.
HSBC Global Research