COCA-COLA ICECEK - Strong growth to continue: BUY

Strong volume growth in Turkish and International markets

Growth in Turkish and international unit sales were much better than our estimates in 4Q12. In our view, upside risks to our Turkish market growth estimates increase as 2012 had a low base. We maintain our constructive view on the Turkish consumer sector. BUY.

Will benefit from strong pricing and normalizing commodity prices
Increasing share of immediate consumption packages and better consumer sentiment should help profitability in Turkish operations. We do not expect major cost pressures on profit margins In its international operations. While we keep our profit margin estimates flat for 2013, the risk is to the upside in our view.

TP raised 15.6% on higher peer multiples and lower cost of debt
We slightly raise our revenue, EBITDA and net profit estimates by 2%, 3% and 4% for 2013E and 2014E on higher international operations volume growth estimates. The Company’s peer multiples expanded more than 10% in the last month. Our TRY46.81 TP, from TRY40.46, is based on a blended valuation of 50:50 weights to our DCF and peer comparables.

Attractive consumer story for 2013
Turkey’s improved growth outlook will support the company as a major consumer story, in our view. Also, its increasing share of international operations (39% in EBITDA in 2013E) which offers strong growth in volumes and profitability makes the Company much more attractive. Worse-than-expected weather conditions and a sharp increase in commodity prices would pose a downside risk to our projections. We expect CCI to be one of the top beneficiaries of consumer demand revival.