3Q12 operational results
lag conservative estimates
Ford Otosan reported net income of TRY144m in 3Q12 (-17% y-y, our estimate: TRY99m, CNBC-e consensus: TRY121m). EBITDA was TRY141m (-36% y-y, our estimate: TRY155m, consensus: TRY162m). Beat at the non-operating level was due to lower D&A than our forecast, TRY25m deferred tax income, and slightly lower financing expenses than our estimates.
We revise down our 2012-13E recurring EPS, revise-up 2014 EPS
We revise down our ‘12-13E recurring EPS by 13%/19% on the weakening outlook on operating margins and exports, while raising ‘14E EPS by 20% due to incremental Transit volumes from the UK, and lowered financing expense estimates. The expected improvement in operating performance in 2014 might limit the impact of a weak ST outlook on the share price.
We maintain our HOLD rating
Our revised 12-mth TP to TRY17.90/share reflects new volume allocation for Transit (+), lower CoE (+), higher peer multiples (+), worsening outlook in export markets (-), lower margin estimates due more severe impact of intense competition/ageing product portfolio in the short-term (-), and earlier phase-out of Transit Connect than our previous estimate (-).
Ford Otosan reported net income of TRY144m in 3Q12 (-17% y-y, our estimate: TRY99m, CNBC-e consensus: TRY121m). EBITDA was TRY141m (-36% y-y, our estimate: TRY155m, consensus: TRY162m). Beat at the non-operating level was due to lower D&A than our forecast, TRY25m deferred tax income, and slightly lower financing expenses than our estimates.
We revise down our 2012-13E recurring EPS, revise-up 2014 EPS
We revise down our ‘12-13E recurring EPS by 13%/19% on the weakening outlook on operating margins and exports, while raising ‘14E EPS by 20% due to incremental Transit volumes from the UK, and lowered financing expense estimates. The expected improvement in operating performance in 2014 might limit the impact of a weak ST outlook on the share price.
We maintain our HOLD rating
Our revised 12-mth TP to TRY17.90/share reflects new volume allocation for Transit (+), lower CoE (+), higher peer multiples (+), worsening outlook in export markets (-), lower margin estimates due more severe impact of intense competition/ageing product portfolio in the short-term (-), and earlier phase-out of Transit Connect than our previous estimate (-).
Margins to remain subdued until the launch of new products
Contrary to the positive signals in 2Q12, 3Q12 results confirm that margins will be subdued until 2014, when the LCV portfolio will be fully renewed. The biggest upside risk for Otosan is new export mandates, such as a possible export of Custom and the new Courier models to the US. Recently FMC decided to relocate the remaining Transit assembly in the UK to Turkey (expected time: 2H13). Our ‘12E reported EPS estimate is up by 12% (+1% y-y) due to accounting of tax incentives on investments. However, we forecast a decline in DPS from TRY1.65 in 2012 to TRY1.41 in 2013 (yield: 7.8%) as most of deferred tax income booked on IFRS accounts will not be included in distributable income of 2012.
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