Upgrade to BUY on strong
pricing and rising scale of global operations
We have a more positive view on the consumer sector after Turkey’s rating upgrade and the sharp decline in interest rates. We expect CCI to be one of the key beneficiaries of consumer demand revival. Strong pricing, robust volume growth and normalization in commodity costs should help improve profit margins further. Upgrade to BUY, from Hold
Higher free cash flow on strong earnings growth and lower capex
On top of the anticipated recovery in the domestic market, CCI’s global operations have attained significant scale, which should help reduce costs and contribute more to the profitability. We believe high profitability and lower capex will lead to a sharp increase in operating free cash flow. We expect CCI’s global operations to account for 38% of total EBITDA in 2013.
Raise TP by 13% on higher premium to peers and higher OPCF
We raise our EBITDA and net income forecasts by 5% each and 7% each for 2013 and 2014. We believe CCI deserves to trade at a higher premium to peers, as we expect CCI’s earnings growth differential with its peers to widen by 2ppt to 6% over 2012-15. Our new TP of TRY40.46 is based on a blended valuation (50/50 weights) using DCF and peer multiples.
Attractive consumer story for 2013, in our view
We believe the improved growth outlook for Turkey will support CCI’s consumer growth story. The rising share of global operations, which offers strong growth potential in terms of volumes and profitability, makes CCI much more attractive. The increasing share of immediate consumption packages and improved consumer sentiment should boost the profitability of the Turkish operations. In the international operations, any major cost pressure on profitability margins looks unlikely. While we keep our profit margin estimates flat for 2013, the risk is to the upside, in our view. Worse-than-expected weather conditions and sharp increase in commodity prices are downside risks to our investment view.
We have a more positive view on the consumer sector after Turkey’s rating upgrade and the sharp decline in interest rates. We expect CCI to be one of the key beneficiaries of consumer demand revival. Strong pricing, robust volume growth and normalization in commodity costs should help improve profit margins further. Upgrade to BUY, from Hold
Higher free cash flow on strong earnings growth and lower capex
On top of the anticipated recovery in the domestic market, CCI’s global operations have attained significant scale, which should help reduce costs and contribute more to the profitability. We believe high profitability and lower capex will lead to a sharp increase in operating free cash flow. We expect CCI’s global operations to account for 38% of total EBITDA in 2013.
Raise TP by 13% on higher premium to peers and higher OPCF
We raise our EBITDA and net income forecasts by 5% each and 7% each for 2013 and 2014. We believe CCI deserves to trade at a higher premium to peers, as we expect CCI’s earnings growth differential with its peers to widen by 2ppt to 6% over 2012-15. Our new TP of TRY40.46 is based on a blended valuation (50/50 weights) using DCF and peer multiples.
Attractive consumer story for 2013, in our view
We believe the improved growth outlook for Turkey will support CCI’s consumer growth story. The rising share of global operations, which offers strong growth potential in terms of volumes and profitability, makes CCI much more attractive. The increasing share of immediate consumption packages and improved consumer sentiment should boost the profitability of the Turkish operations. In the international operations, any major cost pressure on profitability margins looks unlikely. While we keep our profit margin estimates flat for 2013, the risk is to the upside, in our view. Worse-than-expected weather conditions and sharp increase in commodity prices are downside risks to our investment view.
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