Turkish Equity Research: 3Q23 Preview

3Q23 earnings season to kick off this week on October 20th

3Q23 earnings season for companies under our coverage is set to start on October 20th with Arcelik and last until November 9th. Based on our projections, banks will show  14% y/y EPS increase (up 21% q/q) in 3Q23. As for non-banks, we estimate 121%  y/y EPS expansion (up 166% q/q), while EBITDA should increase 98% y/y (up 82% q/q). Overall, we expect Turkish equities we cover to post 84% y/y EPS growth for 3Q23 (up 111% q/q).

Banks: Net income to rise on stronger NIM and lower CoR

We expect banks in our coverage to report aggregate net income of TL87.4bn for 3Q23, up 21% q/q and 14% y/y. Swap-adjusted NIM is set to rise by 140bps on average for the banks in our coverage, mainly due to the higher CPI linker income, though average TL core spread is also expected to expand by 60bps. On the other hand, we estimate net CoR to decline by 125bps q/q to 90bps, as the impact of currency depreciation was more limited. We forecast TL27.1bn trading gains vs TL64.8bn in the previous quarter, with the normalization in core trading gains.

We foresee fee income up by 34% q/q and 137% y/y and we forecast 119% y/y  growth in opex. Loan and deposit growths were 7% and 14% q/q respectively in  the sector. We expect Yapi Kredi to report the highest q/q earnings growth,  along with state banks (Halkbank and Vakifbank) which had very weak 2Qs.


Forecasting 121% y/y EPS expansion (up 166% q/q) for 3Q23: As for non-banks, we estimate 121% y/y EPS expansion (up 166% q/q) and 98% y/y growth in EBITDA (up 82% q/q) in 3Q23. Despite the ongoing global  economic slowdown and the recent economic tightening measures implemented  by the government, non-financial companies’ operating performances have improved in 3Q, as the impact of earthquakes and the election uncertainties are lifted.

Also, FX losses were very limited in 3Q, as TL depreciated by mere 6% q/q in 3Q against USD during the quarter. That said, 5pp increase in corporate taxes, which will also be applicable for 1H23, is likely to put a dent on the earnings.


Relatively strong performers

Autos and Aviation will continue to report strong set of results, although to a lesser extent compared to the previous quarters. TAV Airport’s bottomline to be boosted by one-off stake sale, while Turkish Airlines’ earnings continue to be strong, despite the rise in oil prices. Ford Otosan’s profitability is likely appear stronger, thanks to FX impact on export margins and inventory gains. Food Retailers in general should record q/q improvement in profitability, as gross margins improve following the product price hikes. Tupras should announce strong results, given the strong operating environment and higher CUR. Aygaz should benefit from seasonality, inventory gains and higher income from Tupras.

Energy and finance segment performance should support Koc’s consolidated metrics. Coca-Cola Icecek and Anadolu Efes should record strong earnings growth on effective pricing and cost strategy.

Turk Traktor should benefit from buoyant tractor demand, higher pricing, and income from net cash position. Aselsan should record USD based revenue growth on new contract awards. Ulker should see operational improvement as well as lower FX losses.


Relatively weak performers

Tighter demand conditions and lower margins resume for Kordsa. We expect Erdemir to post a tangible net loss related primarily to higher corporate tax rate, while non-cash FX losses related to hedge accounting could pressure Kardemir’s bottom-line, despite a moderate operating performance. Sisecam should continue to be affected by weaker demand, margin compression and higher tax rate.


By Unlu  & Co



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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 www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.