Dogus Otomotiv - Is Investment
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Equity / Mid Cap. / Auto part 09/04/2013 Dogus Otomotiv Outlook Bloomberg: DOAS TI MARKETPERFORM Reuters: DOAS IS Upside Potential* Market share gain in 1Q unlikely to be sustained Investment Positives Main beneficiary of the macro environment in 2013. As a sole domestic player, DOAS is the main beneficiary of the expected rebound in the domestic demand in 2013, supported by lower interest rates and improved consumer confidence. 1Q retail sales volumes point to a 35% Y-o-Y growth, implying a 18.2 % market share (compared with 15.1% in 1Q2012). The market share gain is unlikely to be sustained during the remainder of the year, due to the new product launches from competitors. We factor in 14.55 market share projection for 2013, compared to 2012 figure at 15.3%, in our projections. Stock Data -1% *excludes dividend yield TRY US$ Price at 08 04 2013 11.55 6.45 12-Month Target Price 11.40 6.40 Mcap (mn) 2,541 1,419 Float Mcap (mn) 648 No. of Shares Outstanding 362 220 mn Free Float (%) 25.52 Avg.Daily Volume (3M, mn) 4.4 2.5 Market Data TRY ISE 100 83,347 US$ Spot Rate 1.7913 One of the highest dividend payers in BIST. The company will pay 86% of its profits as dividends in 2013, implying to a yield of 8.7%. The average dividend payout ratio of the company over the past years was 45%. US$ 12-Month Forw ard 1.8654 Investment Negatives TRY US$ Relative to ISE-100 Volatility in exchange rates is the major risk for the profitability. Being a sole importer, DOAS is open to local market risks including recession, rise in interest rates and taxes and especially volatility in the f-x rates. Before consolidation adjustments, import & distribution accounts for c.70% of total revenues. Additionally, c.80% of DOAS’ new vehicle sales prices are TL based while their cost structure is € based. High leverage. In order to avoid fluctuations in f/x rates, company’s payment method on imported vehicles is cash in advance instead of cash in documents, benefiting from favorable interest rates. Thus, rise in interest rates to push up financial expenses may overshadow the bottom-line in upcoming years. Price Performance (%) 1 Mn 14.0 161 161 91 TRY Relative 500 400 10.0 8.0 300 6.0 200 4.0 Top-line increase despite lower sales volume estimate. The company projects to reach TL5.2bn – TL5.4bn revenues in 2013 compared to TL5.1bn in 2012 despite lower sales volume estimate, pointing out higher average selling prices. Cap-ex is projected as TL65mn-TL100mn in 2013 and TL40mn in 2014 mainly related to the construction for Kartal-Istanbul showroom. However, the company gave an annual cap-ex guidance of TL 25-30mn after 2015. 0.0 1 28 27 25 12.0 2.0 Please refer to important disclaimer at the end of this report. 12 Mn Price / Relative Price Outlook and Valuation Marketperform maintained. Our sum of the part approach valuation for DOAS incorporates all business lines based on DCF method. To be on conservative side for valuation, we have not included DOAS’ 3.75% stake Dogus Holding in our valuation which has a value of US$294mn based on its appraisal value in DOAS’ 2012 financials. However, the company may liquidate its share at Dogus Holding to finance its investments in the future. In this sense, its stake at Dogus Holding might be considered as a hidden financial resource for DOAS. Our PT of TL11.40 offers 8% total return potential including 8.7% dividend yield. Higher than expected 4% domestic auto market growth in 2013 is the upside risk for our valuation. 7 8 8 3 Mn 100 DOAS Relative to ISE 100 0 02-11 08-11 03-12 10-12 05-13 52 Week Range (Close TRY) 2.57 11.70 Esra Suner [email protected] +90 212 350 25 72 Dogus Otomotiv Conservative budget figures for 2013. Dogus Otomotiv conservatively expects domestic automotive market (including HCVs) to be around 830K units in 2013, implying a 2% growth over 2012. Additionally, the company budgets to sell 117K units (including Krone trailer & Meiller dampers) in 2013 down from 126K units in 2012, representing a market share of 13.9% in 2013 down from 15.5% in 2012. The conservative market share estimation for 2013 is explained by intense competition from rivals’ new model launches in 2013 following a quiet 2012 when bestselling PC models of Renault—Symbol and Fiat - Albea completed their life product cycles. However, the company also mentioned that sales volume guidance might be revised up to 128K units during the year, if the momentum observed in domestic auto market during the first three months is sustained. Similar dividend pay-out in 2013. Dogus Otomotiv announced to distribute an eye catching TL220mn gross dividends from its 2012 net earnings (TL1.0 per share), corresponding to a dividend yield of 8.7% and a 86% dividend pay-out ratio. A similar attractive dividend pay-out seems to be on cards in 2013. Will VW establish a production facility in Turkey? Turkish government officials are in close negotiations with German car maker VW in order to persuade it to establish a production facility in Turkey considering the advantages of recent attractive incentive package provided to automotive industry in Turkey and Group’s strong presence in the Turkish market. Dogus Otomotiv’s management believes that a potential VW production facility for LCVs might be advantageous for the Group’s sales in Turkey, lowering the selling prices and increasing the brand’s competitiveness. VW Group is currently evaluating conditions in Turkey. However, VW is likely to invest alone, rather than establishing a JV with a local partner. International Peer Comparison. DOAS currently trades at premium with 2013E EV/EBITDA of 9.6x compared to its international peers’ median of 2013E EV/EBITDA of 7.9x. However, since TUVTURK-Istanbul & TUVTURK North & South, Krone and Meiller operations are consolidated using the equity pick up method, it will not affect DOAS’ EBITDA but contribute the bottom-line. Thus, P/E multiples will be more meaningful for comparison. DOAS trades at slightly premium based on 2013E P/E of 10.3x compared to its international peers’ median of 2013E P/E of 10.2x. Valuation: Sum of the Parts Value for DOAS US$m n % in Total DOAS Valuation 947 DOAS Stake 100% 947 67% 352 25% Valuation Methodology Total Value US$m n Core Business DCF MVIS Business, total DCF TUVTURK North & South DCF 852 33.3% 284 TUVTURK Istanbul DCF DCF 205 37 33.3% Meiller 68 18 1% Krone VDF DCF Int.P/B multiples 155 27 49% 76 13 5% 1% Target Value for DOAS - US$ m n 49% 48% 1,408 2 Dogus Otomotiv 2 3 Sum m ary of Key Financials (TL m n) Incom e Statem ent (TL m n) 2011A* 2012A* Revenues 4,808 5,132 EBITDA 273 325 Net income 142 256 Cash Flow Statem ent (TL m n) Net Income 142 256 Depreciation & Amortisation 20 24 Change in Working Capital (200) (42) Cash Flow from Operations (33) 243 Capital Expenditure 136 91 Free Cash Flow (169) 152 Balance Sheet (TL m n) Tangible Fixed Assets 372 437 Cash & equivalents 48 37 Total assets 1,905 2,223 Short-term debt 467 495 Total Debt 591 592 Total equity 870 1,187 Ratios Net debt/EBITDA (x) 2.0 1.7 EBITDA Margin 5.7 6.3 Net Margin 2.9 5.0 Valuation Metrics EV/Sales (x) 0.2x 0.5x EV/EBITDA (x) 4.4x 7.5x EV/IC (x) 1.3x 2.3x P/E (x) 7.4x 4.7x FCF yield (%) -16% 13% Dividend yield (%) 0% 10% *based on average Mcap during the year 4 5 2013E 2014E 5,235 5,453 322 325 246 245 6 Company Overview 2015E Import and distribution of VW brand PCs and 5,659 345 LCVs, Scania brand HCVs, production of 265 Krone trailers and Meiler tippers, aftersales and retail services and other automotive 265 related services such as Motor Vehicle 28 Inspection business. (22) 271 45 226 246 26 16 288 76 212 245 27 (24) 248 43 204 489 74 2,337 587 669 1,213 505 77 2,404 586 681 1,248 522 80 2,464 544 668 1,305 1.8 6.2 4.7 1.9 6.0 4.5 1.7 6.1 4.7 0.6x 9.6x 2.4x 10.3x 8% 9% 0.6x 9.5x 2.3x 10.4x 8% 8% 0.5x 9.0x 2.2x 9.6x 9% 8% Shareholder Structure 0.0% 30.3% 35.2% 12M Trailing Historic Multiples 20.0 EV/EBITDA 34.5% Dogus Holding A.S. 15.0 Free Float 10.0 Dogus Arastirma Gelistirme ve Musavirlik Hizmetleri A.S. Diger Dogus Grubu Sirketleri 5.0 03/2013 Max. 01/2013 11/2012 09/2012 Min. 07/2012 05/2012 03/2012 Median 01/2012 11/2011 09/2011 07/2011 05/2011 03/2011 01/2011 DOAS Enterprise Value/EBITDA 0.0 Foreign Ownership (%) 31/12/2012 26/03/2013 YTD change 62.48 59.34 -5% Peer Multiple Comparison Bloom berg Estim ates Com pany FORD OTOMOTIV DOGUS OTOMOTIV S TURK TRAKTOR VE TOFAS-TURK OTOMO PEUGEOT SA RENAULT SA VOLKSWAGEN AG BAYER MOTOREN WK DAIMLER AG TATA MOTORS LTD FIAT INDUSTRIAL DAIHATSU MOTOR TOYOTA MOTOR KIA MOTORS CORP HYUNDAI MOTOR *Is Investment Estimates Median -All Com paniesMedian -TurkeyMedian -Other CountriesTurkey's discount prem ium 2013E 10.4 10.7* 9.8 9.6* 9.4 8.9* 7.7 7.8* 11.2 8.8 6.9 7.8 8.9 3.9 9.0 4.9 14.0 6.8 4.9 8.6 9.8 7.9 22% 9.6 9.6* EV/EBITDA 2014E 8.3 8.8* 9.3 9.5* 8.8 8.2* 7.1 7.1* 8.7 7.9 6.2 7.6 8.0 3.2 8.3 4.5 10.2 6.8 4.6 7.2 8.8 6.9 28% 8.8 8.8* 2015E 7.6 7.6* 9.4 9.0* 8.2 7.7* 6.9 6.6* 7.1 7.2 5.9 7.8 6.9 2.8 7.8 4.3 9.3 n.a n.a 6.9 8.2 6.3 22% 3 7.7 7.7* 2013E 12.2 11.3* 10.9 10.3* 12.0 10.3* 12.4 12.3* n.a 6.1 6.8 8.5 8.7 8.1 9.5 10.2 18.7 4.9 5.4 P/E 2014E 10.4 11.4* 10.8 10.4* 11.2 9.5* 11.3 12.2* n.a 4.8 5.9 8.2 7.6 6.5 8.2 9.8 12.6 4.5 5.0 2015E 9.8 10.1* 11.5 9.6* 10.8 8.8* 10.6 11.5* 3.1 3.8 5.3 7.9 6.5 5.8 7.8 9.3 10.9 5.1 4.8 Country 11.1 11.3 12.2 11.3* 10.2 10% 10.3 11.4 11.2 11.4* 8.9 28% 9.3 10.1 10.8 10.1* 7.8 28% TURKEY TURKEY TURKEY TURKEY FRANCE FRANCE GERMANY GERMANY GERMANY INDIA ITALY JAPAN JAPAN SOUTH KOREA SOUTH KOREA Dogus Otomotiv This report has been prepared by “İş Yatırım Menkul Değerler A.Ş.” (İş Investment) solely for the information of clients of İş Investment. Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and with the assistance of independent advisors, as they believe necessary. The information presented in this report has been obtained from public institutions, such as Istanbul Stock Exchange (ISE), Capital Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in any way, nor may this information be printed for distribution purposes or forwarded as electronic attachments without the prior written permission of İş Investment. (www.isinvestment.com) This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's. 4
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