Teknosa (Outperform) - 1Q13: In line with estimates TP:15.00

1Q13: In line with estimates

 

No surprise at the bottom-line

Teknosa’s net income remained flat (y-o-y) at TL9mn in 1Q13, as expected. Although EBITDA grew by 17% y-o-y in 1Q13, TL3.3mn one-off gain due to reversal of a provision related to a store closure in 1Q12 debases y-o-y growth comparison for net income. Excluding one off gains, net income soared by 35% y-o-y in 1Q13. Meanwhile, the company registered TL19mn adjusted EBITDA (excluding other operating income and expenses), in-line with our estimate. Including other operating income and expenses, EBITDA was TL24mn, in-line with consensus estimate.

 

Strong top-line growth was intact in 1Q13

Teknosa opened 6 new stores and relocated 4 stores in 1Q13. Retail area grew by 12% y-o-y to 145K sqm in 1Q13. Apart from strong store openings, Teknosa registered sound l-f-l growth (+22%) in 1Q13. Number of customers grew by 11% y-o-y in 1Q13, with 8% increase in number of visitors and 30bp improvement in conversion rate. Meanwhile, average basket size grew by 16% y-o-y to TL276 in 1Q13. Accordingly, retail revenues surged by 30% y-o-y while top-line figure of Teknosa soared by 44% y-o-y to TL659mn in 1Q13 vs. consensus of TL571mn. The company registered very strong corporate sales in 1Q13. We estimate that corporate sales formed c.7% of total sales in 1Q13. Sound e-commerce revenues further boosted top-line growth in 1Q13.

 

Gross margin was under pressure

E-commerce revenues continued its rapid growth in 1Q13 and accounted for 4.1% of total sales in 1Q13 vs. 2.2% in 2012. Separately, the contribution of low-margin telecom segment sales increased to 23% of total sales in 1Q13 vs. 20% in 2012. Coupled with the negative impact of the sales mix, stiff competition led the gross margin to squeeze by 400bp y-o-y to 16.9% in 1Q13.

 

We raise 2013E top-line but maintain EBITDA and net income estimates

Teknosa maintains its 2013 guidance. The company estimates 15-20% top-line growth and over 5% EBITDA margin (including other operating income and expenses) for 2013. On the other hand, considering very strong top-line and weak EBITDA margin in 1Q13, 2013 guidance indicates 14% top-line growth and 5.4% EBITDA margin for the rest of the year. In our view, top-line guidance of Teknosa is too conservative. Following 1Q13 results, we notched our 2013 top-line estimate by 2% but maintained our EBITDA and net income estimates. Our estimates indicate 17% y-o-y growth for the revenues and imply 5.4% EBITDA margin (including other operating income and expenses) for the last 3 quarter of 2013. Meanwhile our net income estimate of TL58mn is in-line with the company guidance of TL57-60mn.   

 

We maintain our positive view

Following 1Q13 results we maintain our Outperform rating for Teknosa. In our view, Teknosa is likely to be one of the major beneficiaries of increasing consumer spending in Turkey, should expected upgrade of Turkey to an Investment Grade take place.  

 

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