TOASO
- 27.10.2010 09:47
TOASO recorded TRL73mn net income in 3Q10, fully in line with our estimate of TRL72mn and consensus estimate of TRL72mn. Although revenues came perfectly in line with our estimate and consensus estimate, strong EBITDA margin of 11% in 3Q10 was slightly above our estimate of 10.5% and consensus estimate of 10.4%
No surprise at the top line…
Domestic sales volume increased by 16.5% YoY to 31K units in 3Q10 whereas exports were down by 2.9% YoY to 39K units during the same period. On QoQ basis, domestic sales decreased by 9.7% while market share was down to 13.4% from 16%. Moreover, exports were down by 17.7% QoQ in 3Q10 as incentives ended in Europe in 1Q10 while outlook in major export markets still look cloudy.
EBITDA margin of 11% was sustained in 3Q despite lower sales volume
Despite slightly higher than expected opex/rev ratio in 3Q, EBITDA margin is sustained at around 11%. On the back of slightly stronger than expected margins in 3Q, we inched up our 2010E EBITDA margin estimate from 10.3% to 10.6% considering the higher efficiency gains expected due to higher CUR. Going forward, we expect more impact of pull forward demand both in domestic market and export markets starting by 4Q10 or early next year. As a potential risk, intensifying competition might lead to surprising deterioration in margins in case of fluctuations in demand
Maintaining MARKETPERFORM, revising TP by +4% to TRL8.50, upside +5%
On the back of slightly stronger than expected 3Q EBITDA, we revised up our 2010 & 2011 EBITDA estimate by 2% to by 3% to TRL674mn and TRL725mn, respectively, while inching down our 2010 and 2011 revenues estimate by 2% each to TRL6.4bn and TRL6.9bn. On the other hand, we maintained our 2010 net income estimate at TRL367mn while raising our 2011 net income estimate by 4% to TRL423mn. Considering the possible pull-forward demand effect in both domestic & export markets, we might face negative surprise rather than any positive surprise over the next 6-9 months. In 2010, Turkish light vehicle market is set to surpass 675K units, implying 20% YoY growth. Going forward, we expect domestic LV market to decline by 10% YoY to 600K unit levels in 2011. We continue to believe that pull-forward demand impact might be more apparent in 4Q and in 2011. Although we have strong conviction of Tofas’ business model and growth potential, we maintain our cautious stance regarding autos, in general, at currently stretched valuations.
