7 Mart 2013 Perşembe

TEKNOSA - Competitive growth: BUY

Initiate coverage with a BUY rating
Teknosa is the market leader in the electronic retail chain in Turkey with a 42% share. Teknosa differentiates itself from competitors through its: 1) flexible store format, leading to fast store roll-out and operational efficiency; and 2) strong bargaining power, resulting in pricing flexibility, shift of obsolescence risk to suppliers, and net working-capital gains.

Offers good exposure to sector consolidation
We forecast strong growth for Teknosa given Turkey’s currently low per-capita spending in technical consumer goods and ongoing shift to retail chains. Competition among electronic chains is fierce, but we anticipate consolidation in the sector, and expect Teknosa to be an acquirer.

DCF-based TP of TRY11.50 with 10% liquidity discount
Teknosa has a free-float of only 10%, which could cause the stock to drop off investors’ radars or cause high share-price volatility. More intense competition from online channels than our estimates is another major downside risk. Upside risks are rapid sector consolidation, and synergies from its partnership with buying group Euronics.

Increasing focus on online channel
Teknosa’s 26% lfl sales and 40% top-line growth in 2012 is evidence of buying power translating into growth. This growth was supported by promotion campaigns, with suppliers bearing most of the discounts. Its large-format store rollout and strong execution also drove market-share gains in high-margin electronics. The most challenging competition would be online channels, but 1) in-store experience/after-sales services allow for some price premium and the sale of high-margin add-ons; and 2) suppliers are increasingly offering better prices to leading ‘brick’ retailers than online channels. Teknosa’s increasing focused on online sales via kliksa.com and teknosa.com should mitigate competitive pressure.

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