Operating performance was
in line with our expectation
In 4Q12, the company posted TRY52.0m in net income, slightly above our estimate (TRY50.4m) and consensus estimate (TRY46.8m) due to lower income taxes on investment incentives. Posted EBITDA (TRY59.1m) was in line with our estimate (TRY59.8m) and consensus estimate (TRY58.0m).
EBITDA margin increased by 5.1ppt y-y
Despite a sharp decline in high-margin local unit sales by 32% y-y, the company was able to increase its profitability margins by raising prices more than 15-16% y-y. Hence, gross margin of local unit sales increased by 6.1pp y-y to 26.9% in 4Q12. However, increasing share of low-margin imported products reduced the positive impact of the price hike.
Raising TP by 4% on raised income estimates
We raise our net income and EBITDA estimates by 3% and 4% for 2013 and 2014 thanks to slight improvement in profit margins on slightly higher unit prices. A change in government incentive policy that would increase renewal demand for tractors may be an upside risk while the opposite and/or poor crop yields may be downside risks to our estimates.
Slowdown in unit sales to hurt sentiment on the stock
Tractor demand continued to decline in the last six months and we expect the y-y decline in local unit sales to gain pace in 1H13. We expect a 10% further decline in local demand in 2013. Hence, we expect the company to sell 22,526 tractors in 2013, resulting in negative growth momentum in earnings. The company is currently trading at a P/E of 11.7x on 2013 estimates. We expect the company to pay a dividend of TRY4.27/share (assuming an 85% payout ratio). In the absence of a major catalyst (scrap incentive) that would boost tractor demand, we think the stock is fairly priced given the relatively weak demand outlook in the tractor market.
In 4Q12, the company posted TRY52.0m in net income, slightly above our estimate (TRY50.4m) and consensus estimate (TRY46.8m) due to lower income taxes on investment incentives. Posted EBITDA (TRY59.1m) was in line with our estimate (TRY59.8m) and consensus estimate (TRY58.0m).
EBITDA margin increased by 5.1ppt y-y
Despite a sharp decline in high-margin local unit sales by 32% y-y, the company was able to increase its profitability margins by raising prices more than 15-16% y-y. Hence, gross margin of local unit sales increased by 6.1pp y-y to 26.9% in 4Q12. However, increasing share of low-margin imported products reduced the positive impact of the price hike.
Raising TP by 4% on raised income estimates
We raise our net income and EBITDA estimates by 3% and 4% for 2013 and 2014 thanks to slight improvement in profit margins on slightly higher unit prices. A change in government incentive policy that would increase renewal demand for tractors may be an upside risk while the opposite and/or poor crop yields may be downside risks to our estimates.
Slowdown in unit sales to hurt sentiment on the stock
Tractor demand continued to decline in the last six months and we expect the y-y decline in local unit sales to gain pace in 1H13. We expect a 10% further decline in local demand in 2013. Hence, we expect the company to sell 22,526 tractors in 2013, resulting in negative growth momentum in earnings. The company is currently trading at a P/E of 11.7x on 2013 estimates. We expect the company to pay a dividend of TRY4.27/share (assuming an 85% payout ratio). In the absence of a major catalyst (scrap incentive) that would boost tractor demand, we think the stock is fairly priced given the relatively weak demand outlook in the tractor market.
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