Teknosa |BUY: Be boring make money

Technology Superstores are Increasing Their Market Share Despite the aggressive top line growth strategies of the competitors in the online channel, technology superstores’ (Teknosa, Mediamarkt and Vatan) total share in the consumer electronics market is growing. Increasing share of branded technology retailers can be attributed to post covid yearn for emotive customer experience, ability to interactively test device features,
straightforward return policies and an overall more fulfilling customer journey.

Low CAPEX and Negative Cash Cycle

Similar to other retailers, company generates cash from negative working
capital. Average CAPEX / Revenues ratio between 2016-2021 is a mere 0.9%.
High CAPEX is downbeat under high inflation as it offsets the pros of rising
sales prices and pressures the margins, which is not the case for Teknosa.

Prioritizing Profitability: No Growth Without Value

Businesses usually reinvest into growth, regardless of ROIC erosion, which
may lead to permanent capital loss for shareholders. Unlike its competitors in
the online retail segment, where many big players sacrifice bottom line to
gain market share, the company manages to preserve both market share and
profitability. We believe that the company’s well balanced pricing vs market
share strategy is set to contribute to shareholder value.

Valuation is the Icing on the Cake

Frontloaded technology spending of consumers due to exchange rate risks,
recovering financials, free cash flow generation ability due to low CAPEX and
negative cash cycle coupled with appealing valuation, makes the company an
attractive investment opportunity in our view. 2023 EV/Adj. EBITDA (US$)
multiple stands at 4.3x which indicates 43% discount to its peers. Our DCF
based valuation model provides TRY 40.2/share 1 year forward looking target
price for the company implying an 96% upside potential.


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