BUY (L/T) MARKETPERFORM (S/T)
2Q13 Results at a Glance
Net income down 29% yoy -- Turkish
Airlines reported TRL144mn net income for 2Q13, well below expectations
(BurSec: TRL350mn; Cons: TRL293mn). The small miss in revenues was offset by
much better-than-forecast margins, though a huge FX loss hurt the bottom line.
Our View
Effective cost control -- The miss in
revenues was expected, in view of the recently posted tax financials. Passenger
yields were worse than expected, which should be related to the strong
passenger growth, even during Gezi Park events. However, both gross and EBITDA
margin expanded (and were better than expected), thanks largely to improvement
in fuel expenses, as well as personnel expenses. The stock is trading at 2013E
9.0x P/E, at a large discount to international peers’ average of 11.1x. We
believe initial market reaction could be negative -- despite recent weakness
following the tax financials -- and downgrade our S/T rating to
MARKETPERFORM. However, the stock offers ample potential in the long run,
in our view.
Burgan Sec.
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