Turkish Equities: Potential winners post election

Identifying winners: As Turkish elections approach, we try to answer the question we
are most frequently being asked by investors: who are the potential winners among the
Turkish equity space we cover in a positive equity market scenario? Our analysis focuses
on 2018 which was the peak of foreign ownership in free float for most of the Turkish
stocks and the transition of fundamentals to the current period. Many Turkish corporates
have made significant strides over 2018-2022, with strong growth in profitability, when

compared on USD terms (to eliminate the effect of currency depreciation and inflation-
related factors). Our analysis identifies key winners among our Turkish equities coverage.

Among consumer names, our ranking identifies BIM, Sok and Aefes as stocks that have
seen a decline/no growth in foreign ownership and market cap since 2018, despite
stronger market share, high expansion, stronger EBITDA and improvement in balance
sheet strength. A dislocation is apparent and builds a solid case for a re-rating, in our
view. Refer Turkish Consumers, 2 May 2023.

Among industrials/conglomerates, we highlight Koc Holding that has seen a noteworthy
decline in its foreign ownership ratio given its market proxy status, leading to a substantial
widening of its NAV discount, currently at 33% versus average five-year discount prior to
2019 (2014 to 2018) of only 6%. Since 2018, Koc grew consolidated EBITDA by c3.5x in
USD terms, and we estimate it will nearly double its dividend income by 2023e.
Refer Koc Holding, 2 February 2023.

As for private banks, Akbank and Garanti have seen drops in their USD market caps in
the last five years despite substantial increases in BVPS. De-rating looks particularly
profound at Akbank; its current 1Y fwd P/B of 0.51x is substantially below the 2018 peak
of 1.40x and 5Y average of 0.63x. Although our analysis doesn’t allude to a meaningful
dislocation in YKB versus history, we consider that a reflection of the bank’s successful
turnaround. As such, it remains our most preferred in the space for post-election
scenarios. Refer Turkish Private Banks, 20 April 2023.



HSBC Global Research