In
2Q12, Ulker Biskuvi posted TRY43.3m net income, in line with our net income
estimate of TRY43.2m. However, operating performance was better than our
expectation. Posted EBITDA of TRY62.0m was above our estimate of TRY48m and
consensus estimate of TRY45m as the level of decline in production costs and
operating expenses was impressive and unexpected. However, it remains to be
seen that decline in operating expenses and production costs was sustainable.
Note
that 2Q12 was the first period that the synergies from the merger of
distribution and sales arms as well as new merchandising strategy (focusing on
high turnover-high margin products) took hold. Moreover, low prices of cacao
and flour, which account for roughly 20% of total production costs, also helped
the profitability. Yet, the improvement in profit margins
was largely attributed to the cost benefits derived from the merger of
distribution and sales arms.
Both
y/y and q/q comparison of financials is not possible due to several corporate
actions that took place in last one year.
Net
debt of the Company increased from TRY218m to TRY414m due to a dividend payment
of TRY280m.
Net/Net:
As we find the valuation of the Company stretched, we maintain our
"HOLD" rating on the Company, which trades on 17.3x P/E and 10.9x
EV/EBITDA on 2013 estimates.
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