Durables GPM improves, electronics GPM deteriorates
In 3Q12, the electronics segment’s revenue growth slowed as expected (+13% y-y, vs +59% in 1H12). The business saw GPM decline by 4ppt y-y, which the company attributed to increased competition as the market slowed. On a positive note, durables GPM improved 1.9ppt q-q thanks to a decline in commodity costs and favourable pricing.
Downgrade to REDUCE (from Hold) on stretched valuation
We raise our 12-month TP to TRY10.36, mostly on a rerating of peers and higher KFS valuation. We think the solid market-share gain in Europe is more than reflected in the share price after the recent outperformance. Arcelik is trading at a premium to peers on 2013E P/E, vs a discount historically. The key risk is inorganic growth creating shareholder value.
We reduce 2012E EPS by 8%, reflecting 3Q12 results
Arcelik maintained its 2012 EBITDA margin guidance at about 10.5% and revenue growth guidance at minimum 20% (our estimate: 27%). Management is aware of the challenges, but believes the margin guidance can still be reached with only a slight miss. However, given the weak seasonality and the fact that one-off costs are usually booked in 4Q12, we lower our EBITDA margin estimate by 0.2ppt to 10.0% and our 2012 EPS estimate by 8%. Working capital sales ratio declined 1.4ppt q-q in 3Q12 to 37.3% (Sep-11: 41%) on 12-month trailing sales. Net debt was almost unchanged at TRY2,473m (Jun-12: TRY2,534m). Arcelik paid TRY43m in dividends to minorities and incurred TRY116m capex in 3Q12.
In 3Q12, the electronics segment’s revenue growth slowed as expected (+13% y-y, vs +59% in 1H12). The business saw GPM decline by 4ppt y-y, which the company attributed to increased competition as the market slowed. On a positive note, durables GPM improved 1.9ppt q-q thanks to a decline in commodity costs and favourable pricing.
Downgrade to REDUCE (from Hold) on stretched valuation
We raise our 12-month TP to TRY10.36, mostly on a rerating of peers and higher KFS valuation. We think the solid market-share gain in Europe is more than reflected in the share price after the recent outperformance. Arcelik is trading at a premium to peers on 2013E P/E, vs a discount historically. The key risk is inorganic growth creating shareholder value.
We reduce 2012E EPS by 8%, reflecting 3Q12 results
Arcelik maintained its 2012 EBITDA margin guidance at about 10.5% and revenue growth guidance at minimum 20% (our estimate: 27%). Management is aware of the challenges, but believes the margin guidance can still be reached with only a slight miss. However, given the weak seasonality and the fact that one-off costs are usually booked in 4Q12, we lower our EBITDA margin estimate by 0.2ppt to 10.0% and our 2012 EPS estimate by 8%. Working capital sales ratio declined 1.4ppt q-q in 3Q12 to 37.3% (Sep-11: 41%) on 12-month trailing sales. Net debt was almost unchanged at TRY2,473m (Jun-12: TRY2,534m). Arcelik paid TRY43m in dividends to minorities and incurred TRY116m capex in 3Q12.
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