Turkey Equity Strategyrapor.isyatirim.com.tr/2_20171122162852800_1.pdf3 MSCI Turkey index trades at 12m forward P/E ratio of 7.8x, at 38% discount compared to the MSCI EM index trading

Turkey Equity StrategyNovember 2017

Strong Earnings Momentum Overshadowed by Rising Risk Premium

Investment Summary

Macro Outlook

Banking Sector Outlook

Most Recommended List

BIST Chartbook

Turkey: Equity

Strategy

1

Strong Earnings Momentum Overshadowed by Rising Risk Premium 2

Third quarter 2017 financials of BIST companies point to an EPS growth 56% in aggregate terms. Non Financials more thandoubled their net earnings in 3Q17 compared to the same period last year, while their top line and EBITDA growth were 29%and 52%, respectively. Financials posted above inflation earnings growth at 15%. Low base year effect due to the failed coupattempt back in July last year, and strong rebound in economic activity with government incentives, such as KGF (Credit Guaranteefund) and tax incentives at consumer durables and stable TRY, up until September, were the major drivers.

A simple comparison between last 12 month trailing P/E and EV/EBITDA ratios of BIST 100 companies based on 6M17 and 9M17financials indicate to 10% and 7% compression in BIST 100 multiples (in weighted terms), as BIST 100 index was nearlyunchanged since the start of the 3Q earnings season back at end of October. Rising tension in foreign relations (mainly with US andEU) coupled with the increased risk aversion towards EM assets since September, were the major factors behind such a sharpmultiple contraction over a short period of time. For some names, THYAO and PGSUS, the compression in trailing EBITDA multiplewere as high as 41% and 64%, respectively.

Across all asset classes Turkey remains among the most fragile in EM. Since September 7th, when the sell-off in EM currenciesstarted, TRY was sold off by 14%, compared with 5% decline in JPM EM currency index over the same period. Similarly, MSCI TurkeyEquity Index fell by 15 % in dollar terms, compared to a 4% rise in EM index over the same period. Sovereign TR bonds do not painta different picture, as 10 year TL bond yields expanded by 204 bps, compared with 42 bps widening in EM bond index.

We went over our target valuations for our coverage list, reflecting 3Q financials and changes in our FX and interest rateassumptions. We have increased our average risk free rate assumption for the 10 year projection period from 9.7% to 10.54%.Accordingly, our 12m bottom up target for BIST 100 is raised to 124K from 110K, implying a 17% upside potential from the currentlevels. Therefore, a 5% retreat in the index from the current levels, would imply a more compelling 22% upside potential.

Despite some potential headwinds ahead (China slowdown, faster FED rate hikes and strengthening dollar) flows to EM equities isexpected to continue in 2018, though at a lower pace compared to 2017, given the positive growth differential with respect toadvanced economies. Indeed, earnings yield of MSCI EM index stands at 6.4%, lower than its past 10 years average at 7.7%, whilethe earnings yield of MSCI World index at 4.8%, is lower than its average at 5.8%. Domestic growth dynamics is expected to bebenign in 2018 (our GDP growth estimate is 4.5%), as the government is likely to continue fiscal stimulus to keep economic growthrate elevated, at the expense of higher interest rates and inflation, while taking all necessary steps to avoid an accident ahead of2019 elections.

3

MSCI Turkey index trades at 12m forward P/E ratio of 7.8x, at 38% discount compared to the MSCI EM index trading at a P/E ratio of12.7%. The discount is very close to the historical high levels (46%) seen back in 2008 crisis. Meanwhile, MSCI TR / MSCI EM priceratio is currently at 0.34, only 7% higher compared to the lowest low of 0.317 witnessed back in January 2017, indicating to a limiteddownside potential.

GARAN and VAKBN are still favorite names among banks, while, PGSUS, TCELL, TRKCM, SELEC, and INDES are our preferredstocks in non-financials universe

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.85

3.05

3.25

3.45

3.65

3.85

05/2

016

06/2

016

07/2

016

08/2

016

09/2

016

10/2

016

11/2

016

12/2

016

01/2

017

02/2

017

03/2

017

04/2

017

05/2

017

06/2

017

07/2

017

08/2

017

09/2

017

10/2

017

USDTRY US2Yr

MSCI TR / MSCI EM ratio getting close to the low USDTRY vs USD 2Yr Treasury Bond Yield

4

Net FX Position (Hedge Inc.) (mn$) 2017/09 2016/09 Comment

AKSEN -342 -526Its around 70% of EBITDA is dollar linked. Despite its high fx denominated debt, it creates a

natural hedge.

ALARK 115 132

Despite holds a long FX position in consolidated level, the depreciation of TL agaist hard

currencies has a negative impact on net income due to the fx debt of its equity accounted

subsidiaries

ARCLK -68 61 Operating margins benefits from strong €/$ parity

BAGFS -146 -144 Bottomline is negatively affected due to the euro denominated debt

ENKAI 1155 1142Almost all of its revenues FX based and carries a strong FX long position therefore the

depreciation of TL has a positive impact both on operational level and on bottomline

FROTO -551 -640 € denominated exports account for 75% of revenues

MGROS -719 -729Depreciation of TL against euro negatively affects the bottomline due to the euro denominated

debt

PETKM 202 -245 Revenues are dollar based

PGSUS 192 225 Reporting currency is €, exposed to currency risk against appreciation of $ and TL

TAVHL 217 188 Operating margins benefits from w eak TL against €

THYAO -5734 -6899 Reporting currency is $, exposed to currency risk against appreciation of € and JPY

TOASO -695 -751 € denominated exports account for 75% of revenues

TTKOM -3030 -4234Despite that the company hedges some portion, the depreciation of TL has a negative impact on

its bottomline.

TUPRS -1324 -2258 Revenues are dollar based and uses cash flow hedge acocunting

YAZIC -760 -991 High FX denominated debt of its subsidiaries takes its toll on the bottomline

ZOREN -1080 -870 Majority of revenues is dollar based. Uses cash flow hedge accounting.

Net FX positions of selected listed companies

Valuation gap with EM widened in other asset classes as well

5

3

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

464

65

66

67

68

69

70

71

72

EM TRY

JP EM Currency Index vs TRY TRY local bonds vs EM Bonds

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

6.4

6.6

6.8

7.0

7.2

7.4

7.6

7.8

8.0

JP Morgan EM Local Bond Yield JP Morgan Turkey Local Bond Yield (right)

Latest revisions to, estimates, recommendations and target prices6

Stock Screener : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/stock-screener.aspx Template:TP Changes

Stock TP Chn(%) Recommendation 2017E NI Chn(%) Upside%

Old New Old New Old New Rec.Date AEFES 20.96 23.00 10% SELL HOLD 353 326 -8% 0% 2017.11.20 AKCNS 12.79 12.07 -6% HOLD HOLD 237 119 -50% 9% 2017.11.17 AKENR 1.13 0.90 -20% HOLD SELL -359 -225 - 9% 2017.11.17 AKSEN 4.55 4.61 2% BUY BUY 26 47 81% 31% 2017.11.17 ALARK 7.20 8.50 18% BUY BUY 121 121 0% 17% 2017.11.20 ANACM 2.55 2.90 14% BUY HOLD 118 199 69% 11% 2017.11.20 ARCLK 28.73 29.22 2% BUY BUY 1,207 1,028 -15% 49% 2017.11.17 ASELS 27.00 29.00 7% SELL SELL 1,205 1,257 4% -14% 2017.11.20 AYGAZ 17.86 17.29 -3% BUY BUY 556 618 11% 18% 2017.11.17 BAGFS 11.65 10.00 -14% HOLD HOLD 5 -22 - 8% 2017.11.20 BIMAS 72.00 80.00 11% HOLD HOLD 813 868 7% 4% 2017.11.20 BIZIM 9.00 9.00 0% BUY BUY -13 -24 - 31% 2017.11.20 CIMSA 16.30 17.10 5% HOLD BUY 172 174 1% 21% 2017.11.17 DOAS 9.80 10.35 6% HOLD BUY 141 297 111% 30% 2017.11.17 ENKAI 6.26 6.70 7% BUY BUY 2,030 2,609 29% 16% 2017.11.20 FROTO 50.00 57.90 16% BUY HOLD 1,339 1,532 14% 7% 2017.11.17 GUBRF 5.00 4.80 -4% SELL HOLD 45 45 0% 14% 2017.11.20 KCHOL 18.20 20.50 13% HOLD BUY 4,330 4,732 9% 22% 2017.11.20 LOGO 54.04 64.60 20% HOLD HOLD 78 66 -16% 14% 2017.11.20 MAVI 60.11 62.50 4% BUY HOLD 95 94 -1% 13% 2017.11.20 ODAS 6.53 6.54 0% BUY BUY -17 -35 - 31% 2017.11.17 OTKAR 89.10 81.25 -9% SELL SELL 60 64 6% -33% 2017.11.17 PETKM 7.57 7.99 6% BUY BUY 832 1,156 39% 24% 2017.11.17 PGSUS 29.30 35.03 20% BUY BUY 212 359 69% 37% 2017.11.17 SAHOL 13.15 13.60 3% BUY BUY 3,533 3,304 -6% 23% 2017.11.20 SELEC 4.50 4.37 -3% BUY BUY 299 290 -3% 36% 2017.11.20 SISE 5.50 5.59 2% BUY BUY 977 977 0% 27% 2017.11.20 SODA 6.82 6.30 -23% BUY BUY 603 606 0% 25% 2017.11.20 TAVHL 24.68 25.50 3% BUY BUY 711 825 16% 43% 2017.11.17 TCELL 16.04 16.47 3% BUY BUY 2,176 2,224 2% 15% 2017.11.17 THYAO 10.18 14.10 39% BUY BUY 563 466 -17% 32% 2017.11.17 TKFEN 12.50 13.40 7% HOLD HOLD 585 622 6% -8% 2017.11.20 TOASO 34.70 37.00 7% BUY BUY 1,234 859 -30% 14% 2017.11.17 TRKCM 4.53 5.30 17% BUY BUY 418 501 20% 26% 2017.11.20 TTKOM 8.17 7.98 -2% BUY BUY 1,853 1,171 -37% 38% 2017.11.17 TTRAK 86.65 86.48 0% HOLD HOLD 287 306 6% 14% 2017.11.17 TUPRS 132.42 152.49 15% BUY BUY 3,941 3,941 0% 22% 2017.11.17 YAZIC 27.20 29.00 7% BUY BUY -24 -24 - 31% 2017.11.20 ZOREN 1.78 1.85 4% BUY BUY -48 42 - 35% 2017.11.17

https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/stock-screener.aspx

Investment Themes 7

- Underweight banks to 25% : Garanti Bank (GARAN.IS) and Vakıfbank (VAKBN.IS) are the preferred banks in the list.

Banks still offer the highest upside in relative terms based on peer comparison.

- Blue-Chips still offering relative value with respect to peers and history

Pegasus (PGSUS.IS) : Our revised estimates point to below 5.0x 2018E EV/EBITDAR

Trakya Cam(TRKCM.IS) : Strong demand coupled with improved pricing outlook both in domestic market and Europe

Turkcell (TCELL.IS) ) : Data and digital services growth, Attractive multiples with respect to peers.

- Smaller names offering growth at reasonable value :

Selcuk Ecza (SELEC.IS) : Trading at very attractive multiples after the recent sell-off. 2017E top line growth of above 20%

Indeks (INDES.IS) : Compelling valuation and high dividend yield

Stock Screener : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/stock-screener.aspx Template:High Ups. Pot.


Investment Summary

Macro Outlook



BIST Chartbook

Turkey: Equity

Strategy

8

9Year to date market performances

Eurobond 30YR (bps)Currency* (%)

Local Bonds 10YR (bps)Stock Market (MSCI EM Perf, %)

• Negative value indicates the weakening of the currency against the greenback

• Source: Bloomberg

-10.9%

-9.2%

-1.6%

-0.5%

-0.1%

3.0%

3.5%

4.7%

4.8%

10.2%

10.3%

10.4%

16.4%

18.3%

-12.% -7.% -2.% 3.% 8.% 13.% 18.%

Turkey

Argentina

South Africa

Indonesia

Brazil

Ukraine

Russia

India

China

South Korea

Hungary

Mexico

Poland

Czech Rep

-132.5

-129.4

-102.1

-98.0

-70.5

-47.7

-19.3

53.1

168.5

-150 -100 -50 0 50 100 150 200

Indonesia

Brazil

Peru

Hungary

Russia

Colombia

Mexico

S.Africa

Turkey

-112.8

-83.3

-69.4

-55.3

-32.6

-4.1

-130 -80 -30 20

Brazil

Indonesia

Mexico

Colombia

Turkey

Russia

-0.2%

14.6%

15.3%

17.4%

18.5%

21.3%

22.0%

22.4%

25.0%

31.0%

46.1%

48.8%

61.1%

-10.% 0.% 10.% 20.% 30.% 40.% 50.% 60.% 70.%

Russia

Indonesia

Mexico

Philippines

Turkey

Brazil

South Africa

Czech Rep.

India

Hungary

S.Korea

Poland

Argentina

10Market performances since October

Eurobond 30YR (bps)Currency* (%)

Local Bonds 10YR (bps)Stock Market (MSCI EM Perf, %)

• Negative value indicates the weakening of the currency against the greenback

• Source: Bloomberg

-9.8%

-3.1%

-2.9%

-2.6%

-2.2%

-0.5%

-0.3%

0.0%

0.4%

0.4%

0.6%

1.8%

2.2%

4.5%

-10.% -5.% 0.% 5.%

Turkey

Brazil

Mexico

South Africa

Russia

Argentina

Hungary

Indonesia

China

Ukraine

India

Czech Rep

Poland

South Korea

-9.6

-8.7

-3.1

-1.4

8.7

49.0

-20 0 20 40 60

Brazil

Indonesia

Colombia

Russia

Mexico

Turkey

-8.6%

-7.0%

-2.7%

-1.4%

0.8%

1.6%

2.2%

2.2%

3.3%

3.7%

6.0%

11.0%

11.8%

-10.% -5.% 0.% 5.% 10.% 15.%

Turkey

Mexico

Brazil

Argentina

Philippines

Indonesia

Hungary

Czech Rep.

Russia

Poland

India

S.Korea

South Africa

-43.9

6.0

6.1

8.1

10.8

35.9

39.0

83.8

208.5

-50 -10 30 70 110 150 190 230

Hungary

Russia

Peru

Colombia

Indonesia

Mexico

Brazil

S.Africa

Turkey

Economic outlook in a nutshell 11

• In our scenario, in line with the slowdown in economic activity and weak inflation prints FED will hike the policy rate only twice tillthe end of next year. Improvement in growth and inflation outlook support the normalization of monetary policy of ECB (H2 2018).

• Low inflation despite the strong economic activity took its toll on the greenback via postponed FED rate hike probabilities so far in2017. This picture started to change gradually with Fed signals of a rate hike in December 2017, likely to be followed with threemore hikes in 2018. We have recently revised our EUR/USD estimate for 2017 from 1.20 to 1.15. Similarly we revised up our year–end USD/TRY call to 3.85.

• Stimulus packages, strong pace of exports and expansionary fiscal measures boosted economic growth in the first half of the year.Thus we revised up our growth estimate to 6.0% from 5.1% backed with strong industrial production data suggesting furtheracceleration in growth in Q3. We maintain our growth forecast for 2018 at 4.5%, assuming a supportive global backdrop and furtherlegs of expansionary fiscal policies.

• Strong domestic demand and limited correction in food prices will keep inflation on the fast lane for the rest of the year. Due tohigher than projected inflation realization in October and another possible high reading in November, we revised up our year endinflation estimate to 10.5% from 9.4%. In addition, we update our 2018 inflation to 8.9% reflecting the pass-through from weak liraand a vicious inflation inertia.

• Triggers for a worse scenario: Hawkish Fed, early election in 2018.

• Triggers for a better scenario: Further strengthening of the capital inflows to EM, returning back to structural reform agenda.

Global Outlook 2017F 2018 Base Scenario

FED

US 10 YR 2.4% 2.5%

Fed Policy Rate 1.00% - 1.25% 1.50%-1.75%

ECB Expansionary monetary policy Normalization of monetary policy

US Growth 2.2% 2.3%

EU Economic Activity

EU Growth 2.2% 1.8%

Oil Price (Avg) 53 53

Euro-Dollar Parity 1.20 1.20

Geopolitical Risks

Moderate and gradual increase

Strong growth

ISIS, Regional risk including Syria-Russia-Iraq, North Korea risk

Turkey

2017F2018 Base

Scenario

Growth 6.0% 4.5%

CAD/GDP 4.5% 4.7%

Inflation (year end) 10.5% 8.9%

USD/TRY 3.85 4.19

Money market rate 11.80 11.80

Primary balance (% of GDP) -0.1 -0.3

10YR benchmark rate 11.5 11.0

Will Turkey continue to receive its share from global capital flows to EM? 12

Source: IMF

• In the latest World Economic Outlook report, IMF states that capital inflows to emerging markets (bond + equity) rose toUSD205bn in the first 8 months of the year. IMF presents two explanatory factors for this revival.

• The first reason is the improvement in China’s capital account. Resident outflows have abated thanks to tighter enforcement ofcapital flow management measures, weakening in the US dollar, and a pickup in growth momentum.

• The second factor behind the revival of capital flows is improvement in investor sentiment about global outlook, ease in financialconditions and robust economic outlook.

• Turkey received its share from the global flows to EMs between April and August thanks to reduced political uncertainty afterreferendum, strong economic activity and high interest rates due to tight monetary policy stance. In the first 9 months of theyear, foreign capital flows to bond and equity markets reached to USD7.1bn and USD3.1bn respectively.

• Yet, a negative decoupling from peers due to elevating geopolitical risks and deteriorating relations with West is on the cards.IMF expects a moderate recovery in capital inflows to EM in 2018 thanks to robust economic outlook and improving risk appetite.Turkey’s share from global flows may decline if geopolitical risks and tension with West does not abate.

Capital Flows in EM’s Portfolio Flows in Turkey

Source: CBRT, İş Investment

-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0

01-1

502-1

503-1

504-1

505-1

506-1

507-1

508-1

509-1

510-1

511-1

512-1

501-1

602-1

603-1

604-1

605-1

606-1

607-1

608-1

609-1

610-1

611-1

612-1

601-1

702-1

703-1

704-1

705-1

706-1

707-1

708-1

709-1

710-1

7

Equity Bond Total

13Dormant fault line is not a concern in the short-term

Net Investment Pos. vs Curent Account Net Investment Pos. of Turkey (USD bn)

• Economies with high external financing needs and dependent on capital markets will be the most vulnerable in the face of adeterioration in global risk appetite.

• With a large current account deficit close to 4.7% of GDP as of September 2017 and a sizable net international position of USD-440bn (-53% of GDP), Turkey remains as one of the most vulnerable members of fragile five club in face of a sudden reversal ofglobal risk appetite.

• Turkish net international investment position widened to -53% of GDP in August 2017, from -42% in 2016 with the recovery indirect investment, portfolio investment and rising debt financing by private sector. USD34bn of this expansion is mostly stemmedfrom the increase in the liabilities related to FDI. Actually, this does not create a risk as this expansion is connected to the risingmarket value of foreign capital firms in line with the journey of the BIST.

• For the rest, USD14bn of the expansion is related to public debt (mostly inflows to bond market), USD14bn mainly due to rally inthe stock market and USD13bn is debt creating inflows to private sector (banks + corporates). This is a dormant fault line, whichcan be triggered in a sudden stop scenario.

• As the public debt part is not a big concern, the billion dollar question is how vulnerable will be the Turkish corporates and banks ina prolonged risk-off scenario.

Source: Bloomberg, IMF, CBRT Source: CBRT, Turkstat

-65-55-45-35-25-15-55

15253545556575

-6 -4 -2 0 2 4 6 8

Ne

t In

tern

atio

nal I

nvestm

en

t P

os

itio

n (%

of G

DP

)

Current Account Balance (% of GDP)

UK

S.Af rica

Indonesia

Turkey

Mexico

Brazil

Italy

Poland

US

India

Korea

Germany

Russia

Japan

Argentina

Australia

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162017-

Sep

Direct investment -86 -143 -63 -121 -165 -109 -159 -116 -143 -120 -102 -136

Portfolio inv. -81 -119 -67 -89 -116 -108 -178 -167 -191 -145 -142 -176

Equity securities -34 -64 -23 -47 -61 -39 -70 -52 -61 -40 -35 -49

Debt securities -48 -54 -44 -42 -55 -69 -108 -116 -130 -105 -107 -126

Non-Portfolio inv. -101 -129 -145 -140 -167 -187 -206 -243 -237 -229 -225 -240

Currency and dep. 28 38 48 36 14 7 -1 -13 -8 -1 4 1

Loans -123 -158 -181 -165 -169 -180 -190 -212 -210 -208 -206 -214

Trade credit -8 -11 -14 -12 -13 -15 -15 -19 -20 -22 -25 -29

Other assets 2 2 2 1 1 1 1 1 2 2 2 2

Reserve assets 63 76 74 75 86 88 119 131 127 111 106 112

Net Int. Investment Pos. -206 -314 -200 -276 -362 -315 -424 -395 -443 -384 -363 -440

GDP (USD bn) 548 677 777 647 772 832 871 950 935 862 863 834

14Private sector dominates debt of Turkey

Composition of Turkey’s Debt Gross External Debt (% of GDP)

• Turkey’s total debt increased to 116% of its GDP as of Q2-2017, up from 83% a decade ago. Private sector is the main contributorin debt accumulation via adding 41ppt in the same period.

• Turkey’s vulnerability is mostly related to external debt, which reached to USD432bn (52% of GDP as of Q2-2017). Gross externaldebt of the Turkish banks and corporates added up to USD303bn, constituting 70% of all debt.

• External debt stock as % of GDP increased by 15ppt in the last decade while 13ppt of this is from private sector (it is 16ppt afteradding public banks into the picture).

• High volatility and weakening of TRY raise concerns about the sustainability of external debt and external funding.

• Our calculations suggest private sector leverage is still at manageable level and external financing will not be a major concern in2018 thanks to the time-proven strength of the private sector.

Source: İş Investment, CBRT Source: CBRT, İş Investment

16 13 1215 13 12 13 13 13 13 14 16

1114 15

1613 13 13 13 13 14 16

17

8 7 7

8

10 10 11 14 1516 15

16

3 3 3

32 2

22

22 2

2

0

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Q2

Public + CBRT Corporates Banks Non-bank financials

45 38 38 44 40 36 33 31 29 27 28 29

1012 13

11 14 18 19 21 19 19 18 18

26 2835

35 40 44 4552 56 62 68 69

0

20

40

60

80

100

120

140

2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 Q 2

Public Debt / GDP Household Debt /GDP Real Sector Debt /GDP

11 14 15 16 13 13 13 13 13 14 16 17

1112 12 14 16 18 19 22 24 24 24 25

42

8 5 11 14 1318

2023

28 27

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Q2

Domestic FX Debt /GDP TL Debt /GDP

External Debt /GDP Total Debt /GDP

15Corporate leverage still at a manageable level

Real Sector’s Debt (% of GDP) Net FX Pos. Of Real Sector

• With a USD0.3bn net FX surplus as of Sep-2017, Turkish banking system seems to be on the safe side despite sizeable foreigncurrency borrowings. However, devil is hidden in details. Short FX position of the corporates, main client of banks, jumped toUSD 211bn, way above from USD67bn at the pre-crisis level.

• We see the foreign currency debt overhang of private sector as a dormant fault line, likely to be triggered in case of the suddenreversal of the global risk appetite.

• Turkish companies passed several risk-off episodes despite increased political uncertainties in recent years. 2018 is likely to besimilar despite some hiccups.

• Good news is companies posted short term FX surplus albeit limited, creating enough space to manoeuvre in face of adverseconditions.

• More importantly, non-financial sector borrowers are mostly large companies who have a time-proven track record to roll over theirdebts through risk-off episodes.

• All in all, corporate leverage is still at manageable level and does not pose an immediate threat. Yet, beware that, 80% of theforeign currency debt financed by Turkish banks, short-currency position of companies could turn into a credit risk for banks ina fat tail scenario.

Source: CBRT, İş Investment Source: CBRT

0%

5%

10%

15%

20%

25%

30%-250

-200

-150

-100

-50

0

Net FX Position (USD bn)

Net FX Position/GDP (r.a.)

16External funding depends private sector and UFO’s

• Thanks to the strong recovery in portfolioflows, Turkey passed the first 3 quarter of2017 funding with flying colours.

• Our calculations suggest that externalfinancing will not be a major concern for therest of the year despite the loss of momentumin capital flows.

• In our base line scenario for 2018, we do notforesee a major problem in external funding,but has some risks in financing in a fat tailscenario.

• Said that, key assumptions behind ourbaseline scenario are as follows: (i) Foreigninvestors will remain cautiously optimistic onportfolio inflows thanks to the sound economicactivity. (ii) Rollover rates of the private sectorwill stay close to 2017 levels.

• Thus, we forecast a reserve depletion ofUSD6bn for 2017.

• Yet, funding gap could easily reach aboveUSD10bn if developed country central banksimplement tighter monetary policies, riskappetite on EM assets falls and rollover ratesof the domestic private sector falls.

USDbn 2012 2013 2014 2015 2016 2017 2018F

Gross financing requirement 167.5 217.2 189.4 174.1 200.6 225.6 208.9

Current account deficit 48.0 63.6 43.6 32.1 32.6 38.0 44.0

Medium and long-term debt amortization 40.2 43.1 34.9 33.7 56.0 61.2 44.9

Public sector 4.9 3.8 3.1 2.8 2.6 4.6 3.9

Non-bank private sector 25.9 30.2 22.6 19.4 19.4 20.3 18.6

Banks 9.4 9.0 9.2 11.5 34.0 36.4 22.4

Short Term Trade credits 79.3 110.5 111.0 108.3 112.0 126.4 120.0

Capital Inflows 188.3 227.1 189.0 162.3 201.4 223.6 203.0

FDI (net) 9.2 9.3 5.8 12.5 9.2 8.5 5.0

Portfolio (net) 41.0 24.0 20.1 -15.7 6.3 28.0 18.0

Medium and long-term debt borrow ing 44.1 50.8 47.1 68.7 66.7 52.3 38.5

Public sector 2.8 3.0 2.2 1.7 1.7 1.8 1.9

Non-bank private sector 30.9 30.0 27.7 28.9 28.3 20.5 18.6

Banks 10.4 17.9 17.3 38.1 36.7 30.0 18.0

Short term private sector borrow ing (net) 7.1 14.1 4.0 -21.4 -5.2 5.0 5.0

Short term trade credits 80.1 116.2 111.3 110.2 115.6 133.6 132.0

Other -1.2 -1.8 -1.0 0.5 -0.6 -3.3 0.0

Net Errors and Ommision -0.9 1.6 2.0 10.2 11.3 5.2 5.0

Total Financing Gap -20.8 -9.9 0.5 11.8 -0.8 2.0 5.9

Change in off icial reserves* -20.8 -9.9 0.5 11.8 -0.8 2.0 5.9

Rollover Ratios (%) Assumptions

Central Government 57 77 71 58 64 39 50

Corporate (MLT) 119 99 122 149 146 101 100

Banks (MLT) 111 198 188 332 108 82 80

Trade Credits (ST) 101 105 100 102 103 106 110

*- indicates an increase

17Recovery in reserve adequacy ratios

• Following the melt down of USD7.2bn in the first four month of the year, Central Bank reserves has increased by USD11.7bn tillmid-November. If we add gold reserves into account, reserve accumulation since the beginning of the year reaches to USD13.1bn(to USD119.2bn).

• In line with the accumulation of reserves, adequacy ratios started to recover as well. Accordingly, Greenspan-Guoidotti rule (shortterm debt/net international reserves) reached to 91.2% as of September. In addition, Central Bank’s financial requirement index(financing sources/financing requirement), increased to 97.2% in September.

• Although both indices are still lingering below 100% threshold since the beginning of 2016, it is good news to see a recovery. Asthe data is coming with a lag, we could not see the latest situation. Our estimates suggest the continuation of revival withGreenspan and financial requirement index increase to 95% and 98% respectively in October.

• Renewal of TL repayment facility to export rediscount credits as of November (till end January) will prevent USD5bn possibleaccumulation in CBRT’s official reserves. Thus the path of reserves will be set by the capital inflows in the upcoming period.

Net and Gross Reserves


Reserve Adequacy Ratios


24

26

28

30

32

34

36

38

100

105

110

115

120

125

08- 15

10- 15

12- 15

02- 16

04- 16

06- 16

08- 16

10- 16

12- 16

02- 17

04- 17

06- 17

08- 17

10- 17

CBRT Reserves (US$ bn) -rhs Net FX Position - US$ bn

85%

90%

95%

100%

105%

110%

CBRT Foreign Finance Requirement Index Greenspan-Guidotti Rule

3.400

3.450

3.500

3.550

3.600

3.650

3.700

3.750

3.800

3.850

3.900

135

140

145

150

155

160

165

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

11/1

7

Residents' FX Deposits - US$ bn USD/TRY - 5 day MA (right)

18Watch out residents’ FX deposits

• Back on the appreciation of the lira, residents started to accumulate FX reserves as of end January. Till mid-Sep (when thedepreciation of the lira has started) residents increased their FX reserves by USD23.3bn to USD162bn. USD14.1bn of this wasstemmed from households and the rest is from corporates (15 Sep: USD96.7bn and USD65.3bn respectively)

• Whereas, in line with the depreciation of the lira, residents started to reduce FX deposits and in the last 2 months totaldecumulation reached to USD8.8bn.On the flip side, taking into account the FX debt repayments, we have not seen any bigchange in corporate sector FX deposits (only USD0.3bn fall).

• Although households are reducing their FX deposits for the 8 week in a row, reduction in FX deposit was only USD0.2bn andcorporates started to by FX once again in the first week of November.

• In normal times, households are using the depreciation of currency as an opportunity for selling FX, which partially limits theweakening of the lira. On the contrary, if households start to believe that lira will weaken further, they start buying FX as seen inthe last quarter of 2013 and second quarter of 2015. This perception leads to further weakening of the lira.

• From this perspective, we will monitor the developments in FX deposits in the upcoming weeks in order to understand whetherthe move in the first week of November is starting of FX accumulation pattern.

• Last but not least, in line with the fall in FX deposits, the dollarization rate started to retreat as end September. Yet, the currentlevels are well above the last year’s levels.

FX Deposits of Residents


Share of FX Deposits in Total


35.035.536.036.537.037.538.038.539.039.540.040.541.041.5

01/1

6

02/1

6

03/1

6

04/1

6

05/1

6

06/1

6

07/1

6

08/1

6

09/1

6

10/1

6

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

11/1

7

Share of FX deposits in total (residends)

19Inflation stays on the fast lane

• Consumer prices increased by 2.1% MoM in October, higher than market median call. Monthly figure carried the annual inflationup to 11.9% from 11.2% a month ago.

• Both annual inflation and core indicators continued their journey to the north in October.

• Deterioration in the core is related to change in calculation of clothing inflation, recent depreciation of the Lira and strongeconomic activity.

• We expect the pass through from weak TRY to prices to be more effective in the upcoming months.

• Due to higher than projected inflation realization in October and another possible high print in November, we revised up our yearend inflation estimate to 10.5% from 9.4%.

• In addition, we update our 2018 inflation to 8.9% back on the raise in the year-end inflation forecast for 2017 and reflection ofongoing weakness in the lira to prices.

Path of Annual Inflation

Source: CBRT, TURKSTAT, İş Investment

* İş Investment estimate as of November

Core Inflation and Expectations

Source: TURKSTAT, İş Investment

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

Annual Inflaiton* Official year-end inflaiton target

CBRT year-end inflation estimate

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

C Index* Inflation (YoY) Inflation expectations (r.a.)

100.5

95.2 94.6 95.1

87.7

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

125.0

130.0

Feb

-11

May-

11

Aug-1

1

Nov-

11

Feb

-12

May-

12

Aug-1

2

Nov-

12

Feb

-13

May-

13

Aug-1

3

Nov-

13

Feb

-14

May-

14

Aug-1

4

Nov-

14

Feb

-15

May-

15

Aug-1

5

Nov-

15

Feb

-16

May-

16

Aug-1

6

Nov-

16

Feb

-17

May-

17

Aug-1

7

Nov-

17

REER-TR CBRT Intervention Cost of Funding (right)

20Real exchange is in the intervention zone

Real rates and TRY Volatility

Real Exchange Rate and Cost of Funding

• Real Exchange rate fell back to 88, which is CBRT’s previousintervention zone in January 2017.

• Yet, TRY’s implied volatility is well below the Jan 2017 levels,despite the recent increase.

• As a first response, CBRT lowered the upper limit by 5% forthe FX maintenance facility in ROM to 55% and brought backthe TRY repayment facility to rediscount credits.

• Then, as of 22 Nov, CBRT hiked the average funding rate by25bps through liquidity management, without changing theinterest rates. Yet, we have not seen a strong interventiondirectly through the rates.


Source: CBRT, Bloomberg, İş Investment

350bps hike in

upper band,

Oct 2011

425bps hike

in upper

band Jan

2014

Introduction of

normalization,

Aug 2015

Depreciation

50bps

hike in

upper

band Nov

2016

75bps hike in late liquidity

window Jan 2017

100.5

95.294.6 95.1

87.7

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

125.0

130.0

Jan-1

1

Apr-

11

Jul-11

Oct-11

Jan-1

2

Apr-

12

Jul-12

Oct-12

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

REER-TR CBRT Intervention TRY 1 Month Volatility (average,right)

21Decisive tight monetary policy stance

• In its latest monetary policy meeting, Central Bank left all policy rates constant. The Bank underlined that tight stance inmonetary policy will be maintained ‘decisively’ till inflation outlook displays a significant improvement, becomes ‘consistent withthe targets’. Adding “decisively” and “consistent with the targets” words show that CBRT is more hawkish now.

• Due to weakening of the lira and upward revision in 2017 estimate, we revised up our next year inflation estimate to 8.9%.

• Our 2018 projection, which is higher than the bank’s estimate does not point to significant relief in the headline. Thus the CentralBank will not have an opportunity to ease rates in 2018, according to our projections, if the decisive stance against inflation iskept.

• As of 22 Nov, CBRT hiked the average funding rate to 12.25bps (by 25bps) via reducing the Banks’ borrowing limits fromInterbank Money Market for O/N transactions reduced to zero.

• We might see further rate hike pressure if the weakening and the volatility of the currency accelerates and expected correction ininflation does not materialize.

Inflation, Growth and Interest Rates in Emerging Markets

Source: Bloomberg, TURKSTAT, IS Investment

10 year break even inflation rates are used for real interest rate calculation for gov’t bonds

Nominal

money

market rates

Nominal 10YR

government

bond rates

Real interest

rates (based on

money market

rates)

Real interest

rates (based

on10YR

government

bond rates)

Annual Inflation

(October

2017,%)

Change in annual

inflaiton in the last 12

months (ppt)

2016

Growth

(%)

2017

Expected

Growth (%)

Change in policy

rate in the last 12

months (bps)

Brazil 7.50 10.2 3.9 4.8 2.7 -5.2 -3.6 0.7 -650

Indonesia 4.25 6.6 0.3 2.6 3.6 0.3 5.0 5.1 -50

Indıa 6.00 6.6 2.4 3.0 3.6 -0.6 8.0 7.1 -25

Russia 8.25 7.6 4.3 3.7 2.7 -3.4 -0.2 1.9 -175

S.Africa 6.75 9.3 1.4 2.5 4.8 -1.6 0.3 0.7 -25

Turkey 12.25 12.2 2.6 1.8 11.9 4.7 3.2 6.0 445

Mexico 7.00 7.3 0.9 3.3 6.4 3.3 2.3 2.1 225

22CBRT adds a new instrument to policy tool set

• Central Bank (CBRT) added a new instrument, TRY settled non-deliverable forward (DNDF), to its monetary policy tool kit. DNDFis a state-of-art intervention tool, successfully used by central banks of Brazil and Mexico in recent years to deal with theexcessive FX volatility.

• The main difference between the better known NDFs and DNDFs is that the former settles in USD whereas the latter settle in TRY.Foreign investors holding local currency bonds, or local investors the Central Bank will preserve its foreign reserves despite asynthetic intervention to the FX market.

• Brazil and Mexico are the examples in EM league that used NDF tool to intervene the currency. In the aftermath of the TaperTantrum, Central Bank of Brazil announced (on 22 August 2013) a major program of intervention through FX swaps. The programconsisted of daily sales of USD500bn USD swaps. The program also includes USD1bn repurchase agreements (short-term creditlines in USD) on Fridays. The cumulative intervention reached to USD50bn through end 2013. Total amount of currency forwardsstood at USD110bn at end of program in March 2015. The program was successful and the real decoupled positively from EMpeers by 10% following the announcement.

• On 21st of February 2017, Central Bank of Mexico announced that it will offer FX hedging instruments to the market up toUSD20bn due to concerns about NAFTA negotiations. The amount of contracts sold has not reached to announced level(USD3.5bn worth of contracts have been sold). Yet, the mechanism worked and Mexican peso was one of the best performer inEM league with 5% appreciation against USD.

• For Turkey, the mechanism might work in the medium term via channeling the market participants (who are betting on thedepreciation of Turkish lira) to forward market rather than spot and via encouraging banks to borrow from abroad to takeadvantage of the higher domestic FX interest rates.

• But the new tool is obviously not a panacea to the speculative run on Turkish lira due to worries for a heavy penalty on Turkishbanks at the center of a US probe, investigated for violating sanctions against Iran.

• Last but not least, NDF auctions are not expected to have any impact on the long run equilibrium value of the currency. Monetarypolicy can only buy time to deal with structural problems in an economy with flow and stock imbalances.

Macro Outlook Summary of Projections 23

2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E

GSYH büyüme, % 3.2 6.0 4.5 4.5 4.5 4.5 4.5 4.5 4.0 4.0 4.0 4.0

GSYH (milyar TL) 2,609 3,069 3,518 3,997 4,521 5,102 5,759 6,499 7,300 8,199 9,209 10,344

GSYH (milyar dolar) 863 843 875 926 979 1,030 1,092 1,157 1,220 1,287 1,357 1,431

Kişi Başına Gelir (GSYH, dolar) 10,883 10,528 10,821 11,337 11,869 12,379 13,003 13,662 14,289 14,947 15,639 16,366

TÜFE (yıl sonu), % 8.5 10.5 8.9 8.5 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

TÜFE (ortalama), % 7.8 11.0 9.7 8.7 8.3 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Cari Açık (milyar dolar) 33 38 44 46 49 51 55 52 55 58 54 57

Cari Açık / GSYH (milyar dolar) 3.8 4.5 5.0 5.0 5.0 5.0 5.0 4.5 4.5 4.5 4.0 4.0

TL/Dolar (yıl sonu) 3.53 3.85 4.19 4.44 4.80 5.11 5.44 5.80 6.17 6.57 7.00 7.46

TL/Dolar (ortalama) 3.02 3.64 4.02 4.32 4.62 4.95 5.28 5.62 5.98 6.37 6.79 7.23

TL/Euro (yıl sonu) 3.69 4.43 4.82 5.11 5.28 5.62 5.99 6.38 6.79 7.23 7.70 8.20

TL/Euro (ortalama) 3.34 4.09 4.62 4.96 5.19 5.45 5.80 6.18 6.58 7.01 7.47 7.95

Sepet (yıl sonu) 3.61 4.14 4.50 4.78 5.04 5.37 5.71 6.09 6.48 6.90 7.35 7.83

Sepet (ortalama) 3.18 3.87 4.32 4.64 4.91 5.20 5.54 5.90 6.28 6.69 7.13 7.59

Avro/Dolar (yıl sonu) 1.05 1.15 1.15 1.15 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10

Avro/Dolar (ortalama) 1.11 1.12 1.15 1.15 1.13 1.10 1.10 1.10 1.10 1.10 1.10 1.10

Para Piyasası Faizi, % 8.3 11.8 11.8 10.0 9.5 9.5 9.5 9.0 9.0 8.5 8.5 8.5

Gösterge 10 yıllık TL tahvil faizi 11.4 12.0 11.5 11.0 10.5 10.5 10.5 10.0 10.0 10.0 10.0 10.0

30 yıllık Dolar cinsi Eurobond faizi 6.7 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0

Not

Tüketim büyümesi, % 3.7 4.2 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0

İhracat Büyümesi -1.9 9.5 7.5 6.0 6.0 5.0 4.5 4.5 4.5 4.5 4.5 4.5

Nüfus 79.3 80.1 80.9 81.7 82.4 83.2 83.9 84.7 85.4 86.1 86.8 87.4

Investment Summary

Macro Outlook



BIST Chartbook

Turkey: Equity

Strategy

24

Turkish Banks: Widened discount to EM banks 25

Country 17E 18E 19E 17E 18E 19E 17E 18E 19E 17E 18E 19E P/E P/Bk

Brazil 9.5 8.8 7.5 1.57 1.44 1.31 17.3 17.0 18.3 15.4 7.9 16.4 1.00 1.35

Chile 13.8 12.4 11.0 1.84 1.73 1.63 11.3 12.4 16.6 14.5 11.3 13.1 1.44 1.64

Colombia 13.7 10.9 9.8 1.29 1.20 1.18 8.7 14.0 14.5 23.5 25.7 11.3 1.26 1.12

China 7.1 6.6 6.0 0.89 0.81 0.74 13.5 13.0 12.8 6.9 7.5 9.3 0.75 0.83

Czech Rep. 13.5 13.4 13.0 1.63 1.60 1.58 12.5 12.3 13.0 (6.6) 1.0 2.6 1.47 1.65

Egypt 12.3 10.1 7.8 3.32 2.63 2.09 30.7 29.6 29.7 31.5 21.2 29.5 1.24 1.89

Hungary 11.5 11.0 10.6 1.55 1.42 1.30 13.8 13.5 13.2 3.5 4.8 4.0 1.23 1.15

India 16.9 12.9 11.8 2.35 2.05 2.21 10.3 12.3 13.3 25.3 31.3 6.2 1.76 2.13

Indonesia 14.7 12.8 11.2 2.24 1.98 1.76 16.2 16.4 16.6 16.6 14.9 14.8 1.52 1.91

Mexico 13.7 12.0 10.5 1.96 1.79 1.65 14.0 14.5 15.1 25.4 13.9 13.7 1.42 1.57

Peru 12.2 10.6 9.1 2.07 1.84 1.59 18.0 18.1 18.3 12.9 14.9 16.9 1.26 1.77

Poland 16.0 13.7 12.5 1.56 1.46 1.38 9.9 10.7 11.0 14.8 16.4 9.6 1.64 1.38

Russia 6.7 6.1 5.3 1.03 0.95 0.84 6.3 9.0 10.6 33.6 9.8 14.9 0.70 0.86

S. Africa 11.4 10.2 9.3 1.72 1.59 1.56 18.7 18.8 50.8 12.9 11.3 9.4 1.18 1.56

Turkey 6.6 5.7 5.1 0.89 0.79 0.72 13.8 14.1 14.7 14.1 16.8 12.0 0.68 0.78

MSCI EM 9.5 8.7 7.9 1.15 1.05 0.98 9.7 10.9 11.7 13.0 9.8 2.0

MSCI EMEA 9.8 8.6 7.6 1.22 1.13 1.04 6.3 9.0 10.6 24.0 14.6 13.0 1.01 1.08

MSCI EM Asia 9.1 8.4 7.8 1.02 0.94 0.87 13.4 12.9 12.7 10.0 9.0 0.6 0.97 0.89

MSCI EM LatAm 10.3 9.4 8.1 1.62 1.48 1.37 12.8 13.4 16.9 17.1 9.6 16.1 1.09 1.41

Bloomberg Consensus estimates

Ratings are based on descriptive statistics; the lower the rating, the cheaper the asset comparing to its 3-yr historical average.

Relative to MSCI EMP/E P/BV RoE EPS Growth

Turkish Banks: Widened discount to EM banks 26

Blended 12M Fwd P/E Blended 12M Fwd P/E (Turkey/EM Average)

Blended 12M Fwd P/Bk Blended 12M Fwd P/Bk (Turkey/EM Average)

Source: Bloomberg, Is Investment Source: Bloomberg, Is Investment

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

MSCI EM Turkey

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

MSCI EM Turkey

55

60

65

70

75

80

85

90

95

100

105

110

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Turkey/MSCI EM Historic Average

60

65

70

75

80

85

90

95

100

105

110

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Turkey/MSCI EM Historical Average

Turkish Banks: RoEs and excess return are improving 27

Brazi l Chi le

Colombia

China

Czech Rep.

Egypt

Hungary

IndiaIndonesia

MexicoPeru

Poland

Russia

South Africa

Turkey

0.5

1.0

1.5

2.0

2.5

3.0

-1.0 1.0 3.0 5.0 7.0 9.0 11.0 13.0 15.0

18

E P

/Bk

18E RoE - Rf

Investment Summary

Macro Outlook



BIST Chartbook

Turkey: Equity

Strategy

28

Most Recommended List 29

Most/Least Rec. List: https://www.isyatirim.com.tr/en-us/analysis/Pages/top-picks.aspx


Stock Entry Price(TRY) Target Price(TRY) M.Cap(TRY) Upside(%) P/E P/BV EV/EBITDA Weight(%)

ANSGR 21/11/2017 2.84 4.50 1,420 58% 10.29 0.96 - 10 0.0%

GARAN 20/06/2016 9.66 12.72 40,572 32% 6.75 1.00 - 15 -4.9%

INDES 04/11/2016 10.12 14.93 567 48% - 10 2.8%

PGSUS 21/11/2017 26.16 35.03 2,675 34% 7.46 1.38 6.28 15 0.0%

SELEC 04/10/2017 3.2 4.37 1,987 37% 6.85 0.94 5.81 10 -12.1%

TCELL 10/08/2017 14.4 16.47 31,680 14% 14.25 2.07 6.29 15 18.5%

TRKCM 10/07/2017 4.26 5.30 4,814 24% 9.61 1.16 6.32 15 17.1%

VAKBN 11/05/2017 5.62 7.69 14,050 37% 3.73 0.60 - 10 -18.0%

2017E From date of

Entry Rel.%

https://www.isyatirim.com.tr/en-us/analysis/Pages/top-picks.aspx


Investment Case

Anadolu Sigorta is primed to deliver a rare RoE expansion story in the next decade to 14% (+) from

the recent dips of 8-9% region to be mainly driven by more favorable regulatory and operating

environment. This ride will also be buoyed by current rising interest rate environment that will

induce the insurer to better utilize its balance sheet power and its cash loaded vast investment

portfolio.

Catalyst

We foresee that Anadolu’s combined ratio to head down to 102.6% until 2025 from our forecast

level of 109% at the end of 2017. Our assumptions are still very conservative as we have not

penciled in visible recovery in underlying loss ratios which gives a major upside in our view, as for

instance loss frequencies in motor branches seem to have recovered markedly. The recovery in our

combined ratios mainly stems from declining expense ratios.

Anadolu Sigorta’s rich investment portfolio (c. TL 4bn.) will benefit form higher interest rates. The

average yield on the portfolio is expected to increase 150bps in the next decade compared to the

average of the last five years.

Valuation

The stock trades at 8.6x 18E P/E and 0.8x to its estimated 2018 BV based on our estimates,

corresponding to 34% and 47% discounts to MSCI EM Insurers.

Key risks

The company is exposed to slowdown in economic activity through lower Premium production and

higher claims ratio and it is also exposed to a high regulatory risk due to the nature of the business.

Anadolu Sigorta

70

80

90

100

110

120

130

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

ANSGR Relative to BIST100

Base:100


ANSGR BUY

Price ₺ 2.84 3M Vol.mn ₺ 0.1

Target Price ₺ 4.50 YTD Rel. 12%

Upside 58% F.Ow nership 20%

Abs.Figures ₺ 2016A 2017E 2018E

Net Income 88 138 164

Earned Prem. 3,152 3,255 4,031

Equity 1,223 1,478 1,711

Total Assets 5,974 6,893 8,180

Key Ratios 2016A 2017E 2018E

P/E 16.2 10.3 8.6

P/BV 1.2 1.0 0.8

ROE 7% 10% 10%

Growth 17/16% 18/17% 16/19 CAGR%

Net Income 57% 19% 44%

Equity 21% 16% 18%

Earned Prem. 3% 24% 16%

Global Peer (Disc/Prem) 2017 2018

P/E -30% -34%

P/BV -44% -47%



Investment Case

Garanti is perfectly positioned to respond to any revival in consumer demand backed by very low

leveraged balance sheet, comparative cheaper funding access and strong fee generation capacity.

Its relatively stronger capitalization ratios is also a big plus to increase risk weighted assets. Front

loaded NPL recognition in 2014-16 period will create a good base effect for the next three years.

Catalyst

The bank’s higher asset re-pricing ability boosted by commercial loans, CPI linkers and floaters

support the ongoing RoE upswing, also expected benign delivery in asset quality and operating

costs will resurface the bank’s attractive price levels.

Although the bank’s loan growth has relatively slowed down in the second quarter, ongoing loan re-

pricings and renewing CPI-linker valuation based on higher inflation rates will provide a relative

protection against the risen funding costs. Yet, higher swap costs which dented NIM in 2Q will be a

less drag on margins in 2H17 and higher CPI linker gains relative to that of 2Q will recoup the

erosion.

Valuation

The stock trades at 5.5x 18E P/E and 0.9x to its estimated 2018 BV based on Bloomberg

Consensus, corresponding to 34% and 16% discounts to MSCI EM Banks.

Key risks

The bank is exposed to slowdown in economic activity through asset quality channel and facing

higher earnings volatility

Garanti Bankası

70

75

80

85

90

95

100

105

110

115

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

GARAN Relative to BIST100

Base:100

GARAN BUY

Price ₺ 9.66 3M Vol.mn ₺ 105.0

Target Price ₺ 12.72 YTD Rel. -3%



Net Income 5,071 6,007 7,389

Net Int.Income 11,097 13,754 15,180

Deposit 161,232 176,246 199,360

Equity 35,539 40,541 46,825


P/E 8.0 6.8 5.5

P/BV 1.1 1.0 0.9

P/Deposit 0.3 0.2 0.2

P/NII 3.7 2.9 2.7

ROE 15% 16% 17%

Growth 17/16% 18/17% 16/19 CAGR%


Equity 14% 15% 15%

Net Int.Income 24% 10% 15%

Deposit 9% 13% 12%


P/E -25% -34%

P/BV -11% -16%




Investment Case

Through more aggressively tapping into SME and commercial segments, Vakif has been increasing

leverage which resulted in a successful business mix diversification and RoE expansion. The bank

overcame the capital constraints through timely issuance of capital like loans, creating a buffer for

TL depreciation as well. Vakifbank’s strongholds in payroll segment and GPLs have been well

defended, which buoyed the credit spreads and helped to elevate fee revenues along with the

growing credit card business.

The management is keen on reaching at least 15% RoE in the short to medium term, which should

boost the bank’s re-rating process. Higher NPL generation and cost inefficiencies would be the

adverse by-products of this acceleration phase.

Catalyst

Vakıfbank has been one of the main beneficiaries of the easing in regulations i.e. normalized

general provisions, bringing cap to state deposit interest payments and measures related to banks’

capitalizations. We think that these regulations have been a main factor for the RoE expansion

process for Vakifbank.

The government ultimately intends the Treasury to take over the majority shares of the bank from

the foundations. A possible higher valuation compared to the current levels should support the

valuation recovery, though no action like SPO should be expected.

Valuation

Vakifbank trades 3.5x to its forecast 2018 earnings and 0.5x to its estimated 2018 BV, implying

58% and 50% discounts to MSCI EM Banks.

Key risks

The bank is exposed to slowdown in economic activity through asset quality channel and facing

higher earnings volatility.

Vakifbank

70

80

90

100

110

120

130

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

VAKBN Relative to BIST100

Base:100

VAKBN BUY

Price ₺ 5.62 3M Vol.mn ₺ 21.8




Net Income 2,703 3,765 4,057

Net Int.Income 6,967 8,642 9,757

Deposit 123,838 146,684 162,837

Equity 19,239 23,282 26,908


P/E 5.2 3.7 3.5

P/BV 0.7 0.6 0.5

P/Deposit 0.1 0.1 0.1

P/NII 2.0 1.6 1.4

ROE 15% 18% 16%

Growth 17/16% 18/17% 16/19 CAGR%


Equity 21% 16% 18%

Net Int.Income 24% 13% 17%

Deposit 18% 11% 15%


P/E -58% -58%

P/BV -46% -50%




Pegasus HavayollarıPGSUS BUY

Price ₺ 26.16 3M Vol.mn ₺ 15.2




Net Income -134 359 364

Net Sales 3,707 5,186 6,445

EBITDA 89 617 851

Net Debt -1,984 -1,144 -1,798


P/E -20.0 7.5 7.4

EV/EBITDA 43.3 6.3 4.6

EV/Sales 1.05 0.75 0.60

ROA -3% 6% 5%

ROE -9% 20% 17%

Net Debt/EBITDA -22.18 -1.85 -2.11

Net Debt/Equity -1.26 -0.59 -0.78

Growth 17/16% 18/17% 16/19 CAGR%

Net Income n.m 1% n.m

EBITDA 590% 38% 135%

Net Sales 40% 24% 28%


P/E -40% -35%

EV/EBITDA -7% -26%

70

80

90

100

110

120

130

140

150

160

170

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

PGSUS Relative to BIST100

Base:100


Investment Case

Pegasus Airlines achieved all time high EBITDAR margin of 28.2% in 9M17, up by a massive 9.3ppt

YoY, driven by all-time high load factor of 84.3%, up by 6ppt YoY, thanks to strong pax growth of

15% with double digit capacity growth, higher domestic (up 16% in TL base) and international (up

2% in € base) yields and continued cost cutting measures. We project 8% pax growth in 2018

following the estimated 14% increase in 2017, resulting in 0.9ppt improvement in PLF to 85.5% in

2018. Despite ongoing strict cost management and operational efficiency, higher fuel costs are

expected to result in 0.2ppt decline in EBITDAR margin to 23% in 2018.

Catalyst

Continuing pax growth and improvement in profit margins for 4Q17 may be the short term trigger.

Valuation

We maintain our BUY recommendation for PGSUS with our revised PT of TL35.03/share from previous

TL29.30/share on the back of upward revised company guidance for 2017YE and improved operating

outlook for 2018. Our PT of PGSUS is a combination of DCF and International Peers’ Comparison, by

assigning respective 25% and 75% weights. Based on its adjusted 2018E EV/EBITDA of 4.0x and

EV/EBITDAR of 5.0x, PGSUS trades at discount compared to its international peers’ average of 6.1x

and 5.7x, respectively.

Key risks

Rising security concerns hurting traffic growth, worse than expected yields due to increased

competition and sharp increase in fuel prices are the major risks to our call.



Trakya CamTRKCM BUY

Price ₺ 4.26 3M Vol.mn ₺ 2.5





Net Sales 3,016 4,268 4,657

EBITDA 478 943 936

Net Debt -1,153 -832 -821


P/E 8.8 9.6 9.1

EV/EBITDA 12.5 6.3 6.4

EV/Sales 1.98 1.40 1.28

ROA 9% 7% 6%

ROE 18% 13% 12%

Net Debt/EBITDA -2.41 -0.88 -0.88

Net Debt/Equity -0.35 -0.20 -0.18

Growth 17/16% 18/17% 16/19 CAGR%

Net Income -8% 6% 1%

EBITDA 97% -1% 28%

Net Sales 41% 9% 18%


P/E -37% -32%

EV/EBITDA -23% -17%

70

80

90

100

110

120

130

140

150

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

TRKCM Relative to BIST100

Base:100

Investment Case

We believe that Trakya Cam offers an attractive outlook mainly due to improving demand conditionsin Europe with upward price adjustments, fast operational recovery in Romania and Russiaoperations and continuation high demand in domestic, market auto glass segment in particular onthe back of strong export performance of the sector in which we think is a fundamental strength forTrakya Cam.

Catalyst

Strong 9M17 results were driven by robust demand and favourable pricing across the board(Turkey, Europe, Romania and Russia). We expect this to carry to 4Q17 with substantial growth inrevenues and further profitability improvement. Additionally, we expect recently announced 8%price hike in domestic flat glass prices to support our growth and operating margins in 2018.

Valuation

Our DCF-driven target share implies 24% upside potential. Based on its 6.4x 18E EV/EBITDA and9.1x P/E multiples, the stock trades at 6.3x and 32% and 17% discount to its international peers.

Key risks

A hike in natural gas prices by the Turkish Government and possible downturn in the macroenvironment are the main downside risks. Additional restrictions on glass imports from Russia andEU, better than expected margin delivery and additional acquisitions can be listed as the majorcatalysts.




İndeks BilgisayarINDES BUY

Price ₺ 10.12 3M Vol.mn ₺ 0.4





Net Sales 3,794 4,658 5,395

EBITDA 95 115 137

Net Debt 53 150 120


P/E 10.9 5.8 2.6

EV/EBITDA 4.6 4.4 3.7

EV/Sales 0.11 0.09 0.08

ROA 4% 6% 12%

ROE 28% 36% 46%

Net Debt/EBITDA 0.56 1.30 0.88

Net Debt/Equity 0.27 0.41 0.20

Growth 17/16% 18/17% 16/19 CAGR%

Net Income 89% 125% 16%

EBITDA 21% 18% 17%

Net Sales 23% 16% 16%


P/E -51% -79%

EV/EBITDA -55% -48%

70

80

90

100

110

120

130

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

INDES Relative to BIST100

Base:100

Investment Case

We believe that Turkey continues to remain an attractive market for IT sector with favorabledemography and increasing smart phone and internet penetration. The increase in income percapita, popularization of information technologies, and a young population open to innovationcontinues to accelerate Turkey's transition to an information society. Additionally, growing business(mostly SMEs) end-user demand for cloud-based solutions, software and network products shouldpave the way for long term sustainable growth for Indeks.

Catalyst

Indeks has a net cash position of TL132m as of 3Q17, including US$42mn proceeds from the realestate project. (74% of the units are sold). We expect Indeks to distribute TL60m cash dividend in2017 and 2018 (120m in total) corresponding to a 10.6% dividend yield for each year. In ourTL120m dividend estimate for company in the next two years we assumed 40% pay-out ratio fromoperations and TL62m contribution form real estate project (TL33m in 2018 and TL29m in 2019).We expect 2020 dividend yield (fully operational) to normalize at 5.8% with 40% assumed pay-outratio.

Valuation

We reiterate our BUY recommendation for INDEKS Bilgisayar with a revised DCF driven 12-monthTP of TL 14.9/per share offering 48% upside on current levels. INDEKS trades at 2017E and 2018EEV/EBITDA (adjusted with minority interests) of 4.4x and 3.7x which indicates 55% and 48%discounts respectively.

Key risks

Due to the nature of the IT distribution business and rising competition, the sector is characterizedby relatively tiny margins and continuous margin pressure. The company’s EBITDA margin rangesbetween 2.5-4.0%.




Selcuk Ecza SELEC BUY

Price ₺ 3.20 3M Vol.mn ₺ 1.0





Net Sales 8,643 10,217 12,385

EBITDA 253 323 404

Net Debt 167 97 2


P/E 8.2 6.9 6.0

EV/EBITDA 7.4 5.8 4.6

EV/Sales 0.22 0.18 0.15

ROA 6% 6% 6%

ROE 13% 14% 15%

Net Debt/EBITDA 0.66 0.30 0.00

Net Debt/Equity 0.09 0.05 0.00

Growth 17/16% 18/17% 16/19 CAGR%


EBITDA 28% 25% 26%

Net Sales 18% 21% 19%


P/E -57% -58%

EV/EBITDA -35% -43%

70

75

80

85

90

95

100

105

110

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

SELEC Relative to BIST100

Base:100

Investment CaseWe have a long term constructive view on Selcuk Ecza on the back of 5-7% expected growth inTurkish pharmaceutical market in USD terms with respect to favorable demography; market leaderposition of the company (with 42% m/s), brining certain scale advantages in terms greaternegotiation power over suppliers, greater availability of products and flawless delivery logistics and;improved visibility with settled pricing rules in July 2015, removing uncertainties on fix EUR/TRYrate used as reference to determine price of pharmaceutical products. The stock trades at attractive2017E and 2018E P/E ratios of 6.9x % and 6.0x, implying 57% and 58% discounts to internationalpeers.

CatalystYtd depreciation of TRY against EUR on average is hinting for 23% upward adjustment in the fixrate (fix EUR/TRY rate used as reference to determine price of pharmaceutical products) in 2018.Our economist average EUR/TRY expectation is hinting for 21% upward adjustment. That said wehave conservatively assumed 14% effective increase in prices, taking implementation of possibleadditional discounts by government into account. Therefore, there is upside risk to our valuation.

Valuation

Our DCF driven 12M target share price is 4.4/share offers 37% upside potential.

Key risks

Possible regulatory changes by the government on drug pricing and distributor’s profit margins along with more than expected deterioration on net working capital are main risk factors for the company.




TurkcellTCELL BUY

Price ₺ 14.40 3M Vol.mn ₺ 41.8




Net Income 1,512 2,224 2,090

Net Sales 14,101 17,561 19,180

EBITDA 4,573 6,137 6,499

Net Debt -3,729 -8,234 -8,618


P/E 21.0 14.2 15.2

EV/EBITDA 8.4 6.3 5.9

EV/Sales 2.74 2.20 2.01

ROA 5% 7% 6%

ROE 10% 14% 14%

Net Debt/EBITDA -0.82 -1.34 -1.33

Net Debt/Equity -0.23 -0.54 -0.55

Growth 17/16% 18/17% 16/19 CAGR%

Net Income 47% -6% 13%

EBITDA 34% 6% 15%

Net Sales 25% 9% 13%


P/E -21% -8%

EV/EBITDA -23% -31%

70

75

80

85

90

95

100

105

110

115

120

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

08/1

7

09/1

7

10/1

7

TCELL Relative to BIST100

Base:100

Investment Case

Grup revenues increased by 27% YoY in 17 thanks to the strong ARPU performance of Turkcell Turkey driven by solid data and digital services growth and customer base expansion. Mobile multi-play share reached 47% which means more and more customer gets additional services on top of voice and data.

One of the company’s medium term goal is to offer processed data instead of raw data. Possible IPO of some of the subsidiaries such as Global Tower may unlock the hidden value in the mid term. There are two main areas that the company wants to focus in terms of value added services: i) eServices and ii) payment services.

Catalyst

Given the strong first half performance, the company revised its full year guidance for revenuegrowth from 16%-18% to 21%-23%, for EBITDA margin from 32%-34% to 33%-35%, whilemaintained its full year guidance for capex over sales. Accordingly, we estimate revenues to raise toTL17.56bn, up by 25% YoY in 2017, while our EBITDA expectation stands at TL6.1bn with anEBITDA margin of 35%. Besides, the company management stated that their exit plan from Fintur isexpected to be completed by the end of 2017.

Valuation

Our 12M target share price is 16.47/share, offering 14% upside potential. TCELL trades at 2017EEV/EBITDA and P/E of 6.3x and 14.2x, which indicates 23% and 21% discounts, with respect to thepeer group.

Key risks

Main risks of our valuation for Turkcell are intensifying competition in the market that puts pressure on the margins, lingering shareholder issues and possible deterioration in macro outlook.



Summary

Macro Outlook

Investment Themes


BIST Chartbook

Turkey: Equity

Strategy

38

BIST Chartbook – Global Peer Comparison Disc / Prem (2017E) 39

Global Peer Comparison Disc./Prem. for multiples greater than %80 and below -%80 were not included in graph.

ADANA

AKCNS

ALARK

ALKA

ALKIM

ANACM

ARCLK

BIMAS

BOLUC

BRISA CCOLA

CIMSA

CLEBI

DOAS

DOCO

ENKAI

EREGL

FROTO

INDES

KRDMD

LOGO

MGROS

MRDIN

PETKM

PETUN

PGSUS

PNSUT

SELEC

SISE

SODA

TATGD

TAVHL

TCELL

TKFEN

TOASO

TRKCMTTKOM

TTRAK

TUPRS

ULKER

UNYEC

-------------------------

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-80% -60% -40% -20% 0% 20% 40% 60% 80%

EV

/EB

ITD

A P

rem

.

P/E Disc.

2017E/A Global Peer Comparison Disc./Prem.for Companies

EV

/EB

ITD

A D

isc.

P/E Prem.

Stock Screener : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/stock-screener.aspx


BIST Chartbook - Global Peer Comparison Disc / Prem (2018E) 40

Global Peer Comparison Disc./Prem. for multiples greater than %80 and below -%80 were not included in graph.

ADANA

AEFESAKCNS

AKSEN

ALARK

ALKA

ALKIM

ANACM

ARCLK

BIMAS

BOLUC

BRISA

CCOLA

CIMSA

CLEBI

DOAS

DOCO

ENKAI

EREGL

FROTO

GUBRF

INDES

KRDMDLOGO

MRDIN

ODAS

PETKM

PETUN

PGSUS

PNSUT

SELEC

SISE

SODA

TATGD

TAVHL

TCELLTHYAO

TKFEN

TOASO

TRKCM

TTKOM

TTRAK

TUPRS

ULKER

UNYEC

ZOREN

-----------------------

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80%

2018E Global Peer Comparison Disc./Prem.for Companies

EV

/EB

ITD

A P

rem

.

P/E Disc.

EV

/EB

ITD

A D

isc.

P/E Prem.



BIST Chartbook - NI, NII and EBITDA CAGR (2016A-2019E) 41

NI CAGR greater than %50 and EBITDA/NII CAGR greater than %25 and were not included in graph.

ADANA

AKBNK

AKCNS

ANACM

ARCLKAYGAZ

BIMAS

BOLUC

CIMSA

DGATEDOAS

DOCO

EKGYO

ENKAI

EREGL

GARAN

HALKB

INDESKCHOL

KLMSN

LOGO

MRDIN

OTKAR

SAHOLSISE

SODA

TATGD

TAVHL

TCELL

TKFENTOASO

TSKB

TTRAK

TUPRS

UNYEC

VAKBN

YKBNK

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-5% 0% 5% 10% 15% 20% 25%

(EBITDA for Industrial) / (Net Int.Inc. for Banks) CAGR %

NI CAGR %CAGR NI&EBITDA&NII Growth for Companies 2016-2019



BIST Chartbook - NI, NII and EBITDA CAGR (2016A-2019E) 42

NI CAGR greater than %50 and EBITDA/NII CAGR greater than %25 and were not included in graph.

Banking

IT Wholesale

Glass

Cement&Concrete

Consumer Durables

Iron Steel

Food

REIC

AirlinesConglomerate

Communication

Construction

Chemicals

Automotive & Parts

Retail Trade

Petroleum

Pharm. and Health

Technologly

Integrated Textile

Transportation

0%

5%

10%

15%

20%

25%

30%

35%

40%

-5% 5% 15% 25% 35% 45% 55% 65%

NI CAGR %

(EBITDA for Industrial) / (Net Int.Inc. for Banks) CAGR %

CAGR NI&EBITDA&NII Growth for Sectors 2016-2019



BIST Chartbook – 2017E/A Margins vs Historical Averages 43

14.4

713.6

113.2

712.2

810.2

09.3

48.3

97.2

26.1

34.9

74.2

14.1

93.8

93.5

83.5

53.3

83.1

53.0

32.9

22.8

32.8

32.7

72.6

92.4

21.6

21.5

01.3

50.9

00.5

20.4

60.4

10.3

90.3

20.2

80.2

80.2

30.2

30.1

6-0

.14

-0.2

2-0

.22

-0.2

3-0

.26

-0.2

7-0

.35

-0.6

2-1

.33

-1.4

0-1

.41

-1.5

7-1

.60

-1.6

7-1

.96

-2.6

5-3

.86

-3.9

7-4

.98

-5.4

7-5

.75

-7.2

6-7

.27

-7.7

8-9

.94

-11.5

2-1

7.4

4-2

2.3

90.0

0

23%

81%

32%

40%

11%

20%

25%

22%

11%

26%

23%

10%

35%

14%

10%

16%

20%

44%

20%

21%

12%

10%

15%

20%

13%

14%

19%

8% 1

0%

11%

5%

9%

3%

31%

6%

12%

36%

2% 4

%2% 4

%11%

10%

17%

10%

15%

16%

9%

16%

6%

1%

10%

44%

12%

10%

24%

25%

23% 2

6%

20%

33%

18%

50%

4%

34%

22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-25

-20

-15

-10

-5

0

5

10

15

20P

ET

KM

HL

GY

O

ER

EG

L

OZ

KG

Y

AL

AR

K

BA

GF

S

EN

KA

I

TR

KC

M

TU

PR

S

SO

DA

AL

KIM

TK

FE

N

TC

EL

L

YA

TA

S

KC

HO

L

TH

YA

O

AN

AC

M

EK

GY

O

BR

ISA

SIS

E

YA

ZIC

BA

NV

T

AL

KA

CL

EB

I

UL

KE

R

MA

VI

AS

EL

S

FR

OT

O

PE

TU

N

OD

AS

BIM

AS

PN

SU

T

SE

LE

C

BO

LU

C

MG

RO

S

PG

SU

S

TT

KO

M

DG

AT

E

AY

GA

Z

IND

ES

DO

AS

TO

AS

O

DO

CO

AE

FE

S

AR

CL

K

CC

OL

A

KR

DM

D

KL

MS

N

AK

SE

N

TA

TG

D

BIZ

IM

OT

KA

R

TA

VH

L

TT

RA

K

AK

EN

R

CIM

SA

MR

DIN

AD

AN

A

UN

YE

C

ZO

RE

N

LO

GO

AK

CN

S

TR

GY

O

GU

BR

F

ISG

YO

SA

HO

L -

5Yr EBITDA Margin-17E/A Diff.(Left)

17E/A EBITDA Margin(Right)

2017 Est. Or Act. EBITDA Margin/5Yr Avg.EBITDA Margin Diff.



BIST Chartbook - 2018E Margins vs Historical Averages17.1

814.0

712.6

710.5

06.2

96.1

75.2

25.2

24.9

34.6

94.6

34.4

24.2

34.2

23.8

83.6

03.3

73.3

63.1

42.8

42.8

32.7

82.6

62.4

02.2

52.0

31.8

91.8

61.5

41.5

31.3

71.2

81.1

70.7

60.7

20.6

10.5

50.5

20.4

50.4

20.2

70.2

30.0

5-0

.04

-0.0

5-0

.11

-0.1

6-0

.19

-0.2

4-0

.26

-0.4

4-0

.47

-0.5

9-0

.83

-1.5

0-2

.17

-2.2

9-3

.07

-3.0

9-5

.62

-5.6

7-5

.80

-9.3

2-1

4.2

8-2

1.8

8-3

0.1

00.0

0

28%

22%

40%

12%

25%

23%

22%

20%

16%

46%

23% 2

6%

10%

22%

14%

21%

20%

13%

8%

30%

34%

15%

63%

16%

20%

8%

14%

13%

13%

14%

9%

19%

18%

8%

18%

36%

9% 1

0%

5%

3%

6%

10%

2%

11%

12%

10%

3%

16%

7%

4%

45%

4%

2%

10%

29%

12%

25%

25%

37%

20%

24% 2

6%

6%

38%

22%

38%

0%

10%

20%

30%

40%

50%

60%

70%

-40

-30

-20

-10

0

10

20O

DA

S

PE

TK

M

OZ

KG

Y

AL

AR

K

ER

EG

L

AK

SE

N

EN

KA

I

TR

KC

M

BA

GF

S

EK

GY

O

AL

KIM

SO

DA

TK

FE

N

SIS

E

YA

TA

S

CL

EB

I

BR

ISA

YA

ZIC

TU

PR

S

ZO

RE

N

TC

EL

L

AL

KA

TR

GY

O

AK

EN

R

AN

AC

M

KC

HO

L

TH

YA

O

UL

KE

R

PG

SU

S

MA

VI

FR

OT

O

AS

EL

S

KR

DM

D

BA

NV

T

AE

FE

S

TT

KO

M

PN

SU

T

PE

TU

N

BIM

AS

SE

LE

C

MG

RO

S

AR

CL

K

DG

AT

E

TO

AS

O

OT

KA

R

DO

CO

IND

ES

CC

OL

A

TA

TG

D

DO

AS

TA

VH

L

AY

GA

Z

BIZ

IM

KL

MS

N

BO

LU

C

TT

RA

K

CIM

SA

AD

AN

A

LO

GO

AK

CN

S

MR

DIN

UN

YE

C

GU

BR

F

ISG

YO

SA

HO

L

HL

GY

O -

5Yr EBITDA Margin-18E Diff.(Left)

18E EBITDA Margin(Right)

18E EBITDA Margin/5Yr Avg.EBITDA Margin Diff.



BIST Chartbook – Leverage Ratios and Profit Momentum 45

64%

48%

46%

46%

42%

42%

41%

40%

39%

39%

37%

35%

35%

33%

33%

32%

32%

31%

31%

31%

26%

26%

0.2

0.2

0.2

0.2

0.2

0.2

1.73

3.33

0.73

-0.88 -0.88

0.270.33

1.54

-0.47

2.76

1.41

0.76 0.73

-0.43

1.71

0.39

1.58

2.42

2.77

0.32

0.93

-0.25

0.74

-0.56-0.72

-0.55 -0.62

0.44

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0%

10%

20%

30%

40%

50%

60%

70%A

KS

EN

OD

AS

FR

OTO

IND

ES

BIM

AS

YA

TA

S

MA

VI

TTR

AK

LO

GO

OT

KA

R

TO

AS

O

CLE

BI

AD

AN

A

AS

ELS

TTK

OM

TR

GY

O

TU

PR

S

PE

TU

N

BR

ISA

PE

TK

M

TA

VH

L

DG

AT

E

BO

LU

C

ALK

IM

UN

YE

C

TK

FE

N

EK

GY

O

ULK

ER

ROE (Left) Debt/Equity (Sağ)2018 Est. ROE and Debt/Equity for Industrial (ROE>%15)154%

135%

77%

54%

51%

49%

41%

34%

32%

28%

28%

26%

23%

23%

22%

21%

20%

20%

19%

18%

17%

17%

17%

15%

14%

14%

12%

12%

12%

11%

6%

64%

34%30%

33%37%

34%31%

21%23%

21%24%

37%

49%

31%

39%

26%29%

27%

32%29%

22%

37%

48%

32%28%

22%

38%41%

21%

30%

24%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

0%

10%

20%

30%

40%

50%

60%

70%

OZ

KG

Y

PG

SU

S

OD

AS

YA

TA

S

ZO

RE

N

AK

SE

N

TH

YA

O

KR

DM

D

PE

TK

M

MA

VI

TR

KC

M

SE

LE

C

AR

CLK

DO

AS

TA

VH

L

SIS

E

MG

RO

S

SA

HO

L

DG

AT

E

TS

KB

KC

HO

L

VA

KB

N

IND

ES

GA

RA

N

YK

BN

K

CIM

SA

HA

LK

B

TTK

OM

TA

TG

D

BIZ

IM

SO

DA

CAGR EBITDA&NII (Right) Upside Pot. % (Left)

Upside Pot.& 16-19 CAGR EBITDA(NII) Gr. (Upside Pot.>%20)



BIST Chartbook – Dividend Yield Estimates 46

14%

11%

11%

11%

10%

10%

10%

9%

8%

7%

7%

7%

7%

7%

7%

6%

5%

5%

5%

5%

80%

70%

90%

61%

73%

100%

95%

72%

95%

60%

38%

58%

75%

50%

50%

80%

15%

69%

44% 50%

-10%

10%

30%

50%

70%

90%

110%

0%

2%

4%

6%

8%

10%

12%

14%

16%

PE

TU

N

PN

SU

T

BO

LU

C

IND

ES

AY

GA

Z

AD

AN

A

UN

YE

C

PE

TK

M

MR

DIN

TU

PR

S

EK

GY

O

TA

VH

L

CIM

SA

SO

DA

DG

AT

E

TC

ELL

ISG

YO

TTR

AK

BR

ISA

TR

KC

M

Dividend Yield 2018 Estimate (Left) Payout Ratio 2018 Estimate (Right)Dividend Yield & Payout Ratio 2018 Estimate

13

%

12

%

11

%

10

%

10

%

9.6

0%

9%

8%

8%

8%

7%

7%

7%

6%

6%

6%

6%

5%

5%

5%

111%

89%

99%

198%

108%

73% 83%

78%

83%

83% 92%

87% 95%

55% 7

4%

68%

68%

60%

83%

113%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

3%

5%

7%

9%

11%

13%

15%

17%

19%A

DA

NA

BO

LU

C

UN

YE

C

TC

ELL

AY

GA

Z

PE

TU

N

AK

CN

S

CIM

SA

ALK

A

PE

TK

M

MR

DIN

TU

PR

S

ER

EG

L

DG

AT

E

AN

HY

T

PN

SU

T

TTR

AK

ALA

RK

FR

OTO

CLE

BI

Dividend Yield 2017 E/A (Left) Payout Ratio 2017 E/A (Right)

Dividend Yield & Payout Ratio 2017 Estimate/Actual

* Including the estimated 2nd tranche, FROTO’s dividend yield for 2017 reaches to 6%

Dividend Est.Screen : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/coverage-list.aspx#page-5

https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/coverage-list.aspx#page-5

BIST Chartbook - Net FX Position 47

THYAO

TTKOM

KCHOL

AEFES

TUPRS ZOREN

TRGYO

TCELL

AKENR

ALARK

TAVHL

SODA

ASELS

ENKAI

-15%

5%

25%

45%

65%

85%

105%

-7,000 -6,000 -5,000 -4,000 -3,000 -2,000 -1,000 0 1,000

Net FX Position (mnUSD)

Net FX Sales of Total Sales %Bubble Size:Upside Pot.%

• Tupras’ net foreign currency position is TL4.7bn after natural hedge.

• Koç Holding’s consolidated short foreign currency position is US$ -78mn after natural hedge.

BIST Chartbook - Historic Average Prem./Disc. for P/E 48

TickerHist

Avg.PE

17E/A

P/E

17E/A P/E &

Hist.Avg.Disc.

DOCO 25.14 10.28 -59%

PGSUS 16.87 7.46 -56%

HALKB 5.90 2.90 -51%

BRISA 16.24 8.31 -49%

PNSUT 12.20 6.29 -48%

INDES 11.00 5.75 -48%

EKGYO 9.84 5.15 -48%

DOAS 9.51 5.86 -38%

PETKM 12.80 8.41 -34%

VAKBN 5.57 3.73 -33%

YKBNK 7.44 4.99 -33%

PETUN 8.05 5.57 -31%

TAVHL 11.67 8.11 -31%

TRGYO 2.83 1.99 -30%

AKBNK 8.79 6.24 -29%

ISGYO 3.89 2.78 -29%

AYGAZ 9.73 7.08 -27%

ULKER 25.74 19.11 -26%

MGROS 14.17 10.75 -24%

SAHOL 8.67 6.64 -23%

GARAN 8.57 6.75 -21%

MAVI 34.38 27.19 -21%

TKFEN 11.19 8.87 -21%

ANHYT 15.10 12.13 -20%

CCOLA 35.02 28.47 -19%

ENKAI 12.65 10.40 -18%

ALKIM 13.34 10.99 -18%

CLEBI 14.72 12.23 -17%

DGATE 8.99 7.57 -16%

TSKB 6.69 5.66 -15%

EREGL 10.74 9.13 -15%

SELEC 7.98 6.85 -14%

AKGRT 12.75 11.08 -13%

2017 Est./Act. P/E vs P/E Hist. Avg. Disc.

KRDMD 12.99 11.45 -12%

FROTO 14.36 12.71 -11%

BIMAS 29.28 26.42 -10%

LOGO 23.55 21.45 -9%

KCHOL 9.55 8.97 -6%

TTRAK 13.84 13.09 -5%

ANSGR 10.87 10.29 -5%

ALARK 13.76 13.06 -5%

ARCLK 13.24 12.91 -2%

TUPRS 8.28 8.08 -2%

TickerHist

Avg.PE

17E/A

P/E

17E/A P/E &

Hist.Avg.Disc.

2017 Est./Act. P/E vs P/E Hist. Avg. Disc.

Historic Disc./Prem. : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/bist-data-table.aspx#page-4

https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/bist-data-table.aspx#page-4

BIST Chartbook - Historic Average Prem./Disc. for EV/EBITDA 49

TickerHist.Avg.

EV/EBITDA

17E

EV/EBITDA

17E/A

P/E&Hist.Avg.Disc.

BAGFS 16.22 8.46 -48%

PGSUS 11.26 6.28 -44%

DGATE 10.45 6.01 -42%

PNSUT 11.20 6.49 -42%

ZOREN 18.51 10.87 -41%

TUPRS 10.76 6.38 -41%

INDES 5.91 3.76 -36%

KRDMD 9.10 6.06 -33%

PETKM 10.40 6.95 -33%

KCHOL 9.11 6.16 -32%

THYAO 9.26 6.36 -31%

TAVHL 6.75 4.68 -31%

DOAS 10.26 7.20 -30%

PETUN 7.85 5.66 -28%

EKGYO 9.69 7.03 -27%

CCOLA 12.41 9.04 -27%

AKSEN 10.66 8.12 -24%

YAZIC 21.56 16.81 -22%

BRISA 11.64 9.08 -22%

ULKER 15.79 12.35 -22%

TKFEN 6.52 5.14 -21%

SELEC 7.21 5.81 -19%

TTKOM 6.06 5.01 -17%

TRKCM 7.47 6.32 -15%

OZKGY 18.65 15.83 -15%

TTRAK 11.17 9.55 -15%

SAHOL 35.68 30.58 -14%

CLEBI 7.11 6.11 -14%

ALARK 13.11 11.38 -13%

MGROS 9.61 8.38 -13%

DOCO 8.24 7.20 -13%

ARCLK 10.08 8.83 -12%

AEFES 9.75 8.55 -12%

2017 Est./Act. EV/EBITDA & Hist.Avg. Disc.

TickerHist.Avg.

EV/EBITDA

17E

EV/EBITDA

17E/A

P/E&Hist.Avg.Disc.

2017 Est./Act. EV/EBITDA & Hist.Avg. Disc.

BIMAS 18.89 16.90 -11%

TRGYO 14.22 12.79 -10%

AKENR 21.80 19.77 -9%

ALKIM 7.61 6.92 -9%

FROTO 11.32 10.32 -9%

ISGYO 13.95 12.82 -8%

EREGL 6.22 5.81 -7%

MAVI 11.79 11.24 -5%

TATGD 12.29 12.02 -2%

BOLUC 5.98 5.86 -2%

UNYEC 6.81 6.69 -2%

HLGYO 13.26 13.20 0%

Historic Disc./Prem. : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/bist-data-table.aspx#page-4


BIST Chartbook - Foreign Shares 50

Ticker Current Share(%)1M Foreign Share∆ >0 (bps) Upside Pot. % >5 2017E NI ∆ >0 1M Relative Perf. %

ALARK 45.2 2.65 20% 5% -2.20

PETKM 54.0 2.46 23% 59% 5.67

DGATE 39.5 2.24 32% 38% -6.58

SISE 45.0 1.78 26% 31% 6.92

ENKAI 74.3 1.25 14% 47% 10.76

ALKIM 28.9 1.23 46% 11% -2.51

SODA 57.8 1.21 24% 5% 2.45

MRDIN 6.1 1.04 6% 0% 6.49

TAVHL 93.2 0.74 39% 94% 2.95

MAVI 87.1 0.57 21% 88% -5.46

SAHOL 73.0 0.56 27% 24% 6.94

YKBNK 54.7 0.55 28% 22% -5.01

KCHOL 86.7 0.50 22% 37% 3.49

TCELL 92.6 0.43 14% 47% 5.55

LOGO 63.5 0.32 15% 45% 2.51

GARAN 76.0 0.31 32% 18% -4.09

OZKGY 63.8 0.05 64% 396% -1.66

ANSGR 20.0 0.02 58% 57% 3.06

Foreign Share Change

Foreign Ownership : https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/bist-data-table.aspx#page-3


BIST Chartbook – High Yield at a Reasonable Price 51

2017E/A Div.Yield (%) >%5 Upside Pot. >%15

AKCNS ALKA MRDIN AKSEN GUBRF HLGYO OZKGY

TCELL UNYEC ADANA SISE SODA TATGD THYAO TRKCM

BOLUC CIMSA TTKOM YATAS ZOREN

ALARK ANHYT AYGAZ DGATE PETKM

PETUN TTRAK TUPRS

CLEBI EREGL AKBNK

FROTO PNSUT ALKIM ANSGR

ARCLK BIZIM

CCOLA DOAS

GARAN HALKB INDES

KRDMD MGROS ODAS PGSUS

SELEC TAVHL TSKB VAKBN

YKBNK MAVI

2017E P/E & P/E Hist. Avg. Disc.>%15



BIST Chartbook – Growth at a Premium 52

2017E/A NI Growth > %15 Upside Pot.<%5

AKBNK ANHYT ANSGR EKGYO ISGYO

AYGAZ BIMAS DGATE AKGRT

DOAS ENKAI GARAN HALKB BRISA CLEBI DOCO

INDES KCHOL LOGO PETKM PETUN EREGL FROTO PNSUT

SAHOL SELEC TAVHL TSKB TKFEN TRGYO

TUPRS ULKER VAKBN YKBNK

MAVI

ASELS

OZKGY SISE ALKA

TCELL YATAS BANVT KLMSN

OTKAR UNYEC

ADANA AKCNS ANACM BOLUC CIMSA HLGYO MRDIN SODA TATGD TOASO TRKCM

TRKCM

2017E P/E & P/E Hist. Avg. Prem.>%5



BIST Chartbook - Coverage List Companies 53

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld

CLEBI 34.00 826 40.62 U.R D 4.3 7.5 0.6 22 48 6% 94% 2% 68 91 868 941 172 198 221 296 12.2 9.1 3.7 2.8 6.1 5.3 44% 35% 9% 12% E E

DOCO 226.60 2,208 294.44 U.R D 22 26 1.6 73 77 1% 32% 1% 215 270 3,602 4,113 357 414 1,414 1,791 10.3 8.2 1.6 1.2 7.2 6.2 17% 17% 7% 7% E E

PGSUS 26.16 2,675 35.03 29.30 34 O.P M -12 -9 15 36 32 0% 359 364 5,186 6,445 617 851 1,932 2,296 7.5 7.4 1.4 1.2 6.3 4.6 20% 17% 6% 5% E E

TAVHL 18.40 6,684 25.50 24.68 39 O.P M -0.1 3 12 44 93 4% 57% 7% 825 1,127 4,608 5,572 2,014 2,520 3,907 4,700 8.1 5.9 1.7 1.4 4.7 3.7 24% 26% 7% 8% E E

THYAO 10.80 14,904 14.10 10.18 31 O.P M 9.3 13 280 50 56 2% 15% 0% 466 2,251 38,647 44,982 6,173 6,513 18,355 20,606 32.0 6.6 0.8 0.7 6.4 6.0 3% 12% 1% 3% E E

Airlines&Services 10.3 7.4 1.6 1.2 6.3 5.3 20% 17% 7% 7%

BAGFS 9.20 414 10.00 11.65 9 M.P M -9.7 -7 1.1 59 4.4 3% 28% 0% -22 12 465 665 93 103 492 519 -19.2 36 0.8 0.8 8.5 7.6 -4% 2% -2% 1% E E

GUBRF 4.02 1,343 4.80 5.00 19 M.P U -15 -12 6.5 24 17 3% 45% 0% 21 72 3,250 3,988 117 231 1,228 1,264 64.2 18.7 1.1 1.1 15.0 7.6 2% 6% 1% 2% E E

Agricultural Chemicals 22.5 27.2 1.0 0.9 11.7 7.6 -1% 4% -1% 1%

DOAS 7.91 1,740 10.35 9.80 31 O.P U -4.4 -1.4 2.8 15 9.7 9% 83% 0% 297 259 13,088 14,563 588 649 1,416 1,675 5.9 6.7 1.2 1.0 7.2 6.5 23% 17% 6% 4% E E

FROTO 55.50 19,476 57.90 50.00 4 M.P D 16 19 4.3 18 80 5% 65% 4% 1,532 1,954 24,666 29,360 2,083 2,616 3,906 4,558 12.7 10.0 5.0 4.3 10.3 8.2 43% 46% 15% 16% E E

OTKAR 117.50 2,820 81.25 89.10 -31 U.P M 10 13 4.8 27 13 4% 93% 2% 64 106 1,813 2,156 182 252 247 299 44.0 26.5 11.4 9.4 20.5 14.9 26% 39% 3% 5% E E

TOASO 32.88 16,440 37.00 34.70 13 O.P M 8.7 12 5.4 24 87 5% 67% 2% 859 1,323 12,400 17,889 1,345 1,976 3,278 3,930 19.1 12.4 5.0 4.2 14.2 9.7 28% 37% 7% 10% E E

Automotive & Parts 15.9 11.2 5.0 4.2 12.3 8.9 27% 38% 6% 8%

TTRAK 75.00 4,003 86.48 86.65 15 M.P M -2.9 0.1 1.5 25 76 8% 92% 5% 306 325 4,207 4,732 497 582 756 868 13.1 12.3 5.3 4.6 9.5 8.2 42% 40% 12% 11% E E

Tractors 13.1 12.3 5.3 4.6 9.5 8.2 42% 40% 12% 11%

AEFES 24.12 14,282 23.00 20.96 -5 M.P U 12 16 2.7 32 81 2% n.a 1% 326 465 12,053 13,655 2,028 2,434 9,465 9,733 44 30.7 1.5 1.5 8.5 7.1 3% 5% 1% 2% E E

BANVT 20.72 2,072 5.73 U.R D -13 -11 7.4 8.3 24 0% 62 52 2,184 2,437 219 195 446 551 33.5 39.9 4.7 3.8 10.3 11.6 16% 10% 6% 5% E E

CCOLA 36.86 9,376 43.50 43.50 18 M.P D -0.6 2.5 3.3 27 93 1% n.a 1% 329 457 8,199 9,317 1,250 1,461 4,585 4,959 28.5 20.5 2.0 1.9 9.0 7.7 7% 10% 3% 4% E E

PNSUT 12.14 546 21.90 U.R -11 -8.1 0.2 38 56 7% 84% 11% 87 104 1,222 1,383 105 121 635 666 6.3 5.2 0.9 0.8 6.5 5.6 14% 16% 9% 10% E E

PETUN 9.28 402 13.80 13.60 49 O.P M -3.3 -0.4 0.1 33 30 8% 73% 14% 72 80 715 791 72 80 246 262 5.6 5.0 1.6 1.5 5.7 5.1 22% 31% 13% 14% E E

ULKER 18.58 6,354 20.97 22.50 13 O.P M -6.6 -3.8 3.7 42 37 4% 51% 3% 332 392 4,362 4,848 577 653 1,832 2,042 19.1 16.2 3.5 3.1 12.4 10.9 19% 20% 6% 8% E E

TATGD 4.63 630 5.60 7.14 21 M.P U -14 -12 3.9 41 20 2% 34% 3% 49 62 1,055 1,193 59 82 490 521 12.8 10.1 1.3 1.2 12.0 8.6 10% 12% 7% 8% E E

Food & Beverages 19.1 16.2 1.6 1.5 9.0 7.7 14% 12% 6% 8%

ADANA 6.32 557 7.54 7.44 19 M.P M -0.8 2.3 0.1 58 4.6 10% 87% 10% 57 67 220 258 50 65 192 198 9.8 8.3 2.9 2.8 11.5 8.9 29% 35% 22% 24% E E

AKCNS 10.76 2,060 12.07 12.79 12 M.P M -6.5 -3.7 0.4 20 29 7% 90% 5% 119 151 1,507 1,707 267 340 1,097 1,153 17.3 13.6 1.9 1.8 9.3 7.3 10% 13% 6% 7% E E

BOLUC 5.57 798 6.45 6.51 16 O.P U 2.4 5.5 0.2 30 13 8% 75% 11% 96 104 498 552 154 161 427 445 8.3 7.7 1.9 1.8 5.9 5.6 22% 24% 15% 16% E E

CIMSA 14.05 1,898 17.10 16.30 22 O.P U 0.6 3.7 1.1 41 54 8% 79% 7% 174 195 1,400 1,632 332 415 1,233 1,298 10.9 9.7 1.5 1.5 9.5 7.6 14% 15% 7% 7% E E

MRDIN 4.35 476 4.61 4.59 6 M.P U 3.3 6.5 0.3 45 6.1 9% 92% 8% 38 41 160 177 40 43 241 245 12.5 11.6 2.0 1.9 11.5 10.7 16% 17% 13% 14% E E

UNYEC 4.31 533 4.13 4.09 -4 U.P M 0 3.1 0.1 8.6 3.9 9% 96% 10% 56 60 270 298 71 78 282 289 9.6 8.9 1.9 1.8 6.7 6.1 20% 21% 17% 17% E E

Cement & Concrete 10.4 9.3 1.9 1.8 9.4 7.5 18% 19% 14% 15%

Price and Key Ratios

P/E

2017 E

st./A

ct.

2018 E

st./A

ct.

Net Sales ₺Net Income ₺ ROAROEEV/EBITDAP/BVEquity ₺EBITDA ₺

Coverage List: https://www.isyatirim.com.tr/en-us/analysis/stocks/Pages/coverage-list.aspx#page-1



2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld


P/EEquity ₺EBITDA ₺

2017 E

st./A

ct.

2018 E

st./A

ct.

Net Sales ₺Net Income ₺ ROAROEEV/EBITDAP/BV

TCELL 14.40 31,680 16.47 16.04 14 O.P M 2.4 5.6 42 49 93 12% 204% 6% 2,224 2,090 17,561 19,180 6,137 6,499 15,292 15,603 14.2 15.2 2.1 2.0 6.3 5.9 14% 14% 7% 6% E E

TTKOM 5.67 19,845 7.98 8.17 41 O.P M -16 -14 7.4 15 78 6% 88% 4% 1,171 1,729 17,995 19,355 6,483 7,045 4,558 6,012 16.9 11.5 4.4 3.3 5.0 4.6 29% 33% 4% 6% E E

Communications 15.6 13.3 3.2 2.7 5.7 5.3 22% 23% 6% 6%

ARCLK 19.64 13,271 29.22 28.73 49 O.P M -16 -13 16 25 76 4% 49% 3% 1,028 1,247 20,893 24,650 2,070 2,585 6,586 7,498 12.9 10.6 2.0 1.8 8.8 7.1 16% 18% 5% 6% E E

Consumer Durables 12.9 10.6 2.0 1.8 8.8 7.1 16% 18% 5% 6%

ANACM 2.56 1,920 2.90 2.55 13 M.P D 13 16 2 23 59 3% 20% 2% 199 135 2,108 2,268 432 444 1,965 2,052 9.6 14.2 1.0 0.9 6.5 6.4 11% 7% 4% 3% E E

SISE 4.44 9,990 5.59 5.50 26 O.P M 3.7 6.9 5.5 34 45 2% 23% 3% 977 1,167 10,300 11,330 2,135 2,506 9,360 10,293 10.2 8.6 1.1 1.0 5.9 5.0 11% 12% 5% 6% E E

SODA 5.08 4,572 6.30 6.82 24 O.P M -0.6 2.5 5.3 39 58 4% 30% 7% 606 576 2,208 2,324 582 600 3,069 3,491 7.5 7.9 1.5 1.3 7.1 6.9 21% 18% 17% 14% E E

TRKCM 4.26 4,814 5.30 4.53 24 O.P M 4.4 7.6 2.5 31 57 2% 27% 5% 501 530 4,268 4,657 943 936 4,145 4,561 9.6 9.1 1.2 1.1 6.3 6.4 13% 12% 7% 6% E E

Glass 9.6 8.8 1.1 1.0 6.4 6.4 12% 12% 6% 6%

EREGL 8.97 31,395 8.62 -4 M.P U 5.8 9 31 48 78 7% 85% 5% 3,438 2,691 16,016 17,082 5,157 4,308 17,607 15,144 9.1 11.7 1.8 2.1 5.8 7.0 21% 16% 15% 11% E E

KRDMD 2.17 1,693 2.63 21 O.P -17 -14 70 92 36 6% 27% 0% 148 185 2,607 2,656 404 478 1,679 1,841 11.4 9.2 1.0 0.9 6.1 5.1 9% 10% 4% 4% E E

Iron Steel 10.3 10.4 1.4 1.5 5.9 6.0 15% 13% 9% 8%

AYGAZ 14.58 4,374 17.29 17.86 19 O.P M -7.8 -5 1.4 24 74 7% 75% 10% 618 475 8,752 10,935 384 444 2,910 2,915 7.1 9.2 1.5 1.5 12.6 10.9 22% 16% 13% 9% E E

TUPRS 127.10 31,828 152.49 132.42 20 O.P M -2.8 0.2 43 49 83 7% 66% 7% 3,941 3,472 49,581 63,547 5,683 5,388 10,328 11,236 8.1 9.2 3.1 2.8 6.4 6.7 43% 32% 12% 10% E E

Oil & Gas 7.6 9.2 2.3 2.2 9.5 8.8 32% 24% 13% 10%

SELEC 3.20 1,987 4.37 4.50 37 O.P M -8.6 -5.8 1 15 60 2% 20% 1% 290 330 10,217 12,385 323 404 2,112 2,342 6.9 6.0 0.9 0.8 5.8 4.6 14% 15% 6% 6% E E

Pharmaceutical and Health 6.9 6.0 0.9 0.8 5.8 4.6 14% 15% 6% 6%

BIMAS 75.50 22,922 80.00 72.00 6 M.P M -1.4 1.7 13 65 71 2% 64% 2% 868 1,076 24,720 30,269 1,299 1,600 2,313 2,825 26.4 21.3 9.9 8.1 16.9 13.7 41% 42% 15% 16% E E

BIZIM 6.93 416 9.00 9.00 30 O.P M -15 -12 0.7 44 26 1% 35% 1% -24 1 2,747 3,218 35 74 124 123 -17.1 398.5 3.3 3.4 11.7 5.6 -19% 1% -4% 0% E E

MGROS 27.20 4,842 35.00 35.00 29 O.P M 3 6.1 2.6 19 51 0% 450 -70 13,466 15,883 844 995 691 620 10.8 -69 7.0 7.8 8.4 7.1 102% -11% 6% -1% E E

Retail Trade 10.8 21.3 7.0 7.8 11.7 7.1 41% 1% 6% 0%

BRISA 6.90 2,105 5.18 U.R U -5.7 -2.9 1.6 10 18 5% 84% 5% 253 294 2,195 2,455 437 500 861 1,029 8.3 7.2 2.4 2.0 9.1 7.9 35% 31% 9% 11% E E

Tyre Production 8.3 7.2 2.4 2.0 9.1 7.9 35% 31% 9% 11%

ASELS 33.28 33,280 29.00 27.00 -13 U.P M 12 15 111 15 31 1% 18% 0% 1,257 1,535 6,330 7,457 1,216 1,427 3,897 5,307 26.5 21.7 8.5 6.3 27.5 23.4 33% 33% 14% 14% E E

Defense Techology 26.5 21.7 8.5 6.3 27.5 23.4 33% 33% 14% 14%

AKENR 0.83 605 0.90 1.13 9 U.P D -11 -8 2.2 25 12 0% -225 -208 1,799 1,694 180 276 925 717 -2.7 -2.9 0.7 0.8 19.8 12.9 -22% -25% -5% -4% E E

AKSEN 3.44 2,109 4.61 4.55 34 O.P M 1.5 4.6 2.7 21 46 0% 47 277 3,822 5,129 601 1,196 369 492 44.7 7.6 5.7 4.3 8.1 4.1 12% 64% 1% 7% E E

ODAS 5.02 681 6.54 6.53 30 O.P M -13 -11 3.2 37 2.6 1% 18% 0% -35 81 525 981 59 275 128 210 -19.2 8.4 5.3 3.2 25.0 5.4 -25% 48% -3% 6% E E

ZOREN 1.35 2,700 1.85 1.78 37 O.P M -14 -11 22 15 5.5 0% 42 194 4,033 3,796 790 1,127 1,244 933 65.0 13.9 2.2 2.9 10.9 7.6 5% 18% 0% 2% E E

Utilities 21.0 8.0 3.7 3.1 15.3 6.5 -9% 33% -1% 4%




2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld


P/EEquity ₺EBITDA ₺

2017 E

st./A

ct.

2018 E

st./A

ct.

Net Sales ₺Net Income ₺ ROAROEEV/EBITDAP/BV

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld E

st.

EKGYO 2.53 9,614 3.61 U.R D -7.3 -4.5 49 50 68 3% 42% 7% 1,868 2,567 3,150 4,509 1,392 2,068 11,851 13,391 5.1 3.7 0.8 0.7 7.0 4.7 17% 20% 10% 13% E E

HLGYO 0.89 730 1.31 1.64 47 O.P M -14 -11 1.6 21 4 1% 6% 2% 53 92 70 256 57 97 1,938 2,057 13.7 7.9 0.4 0.4 13.2 7.8 3% 5% 3% 5% E E

ISGYO 1.28 1,170 1.90 U.R -5.2 -2.3 1.3 47 26 4% 26% 5% 421 599 494 931 170 350 3,533 4,068 2.8 2.0 0.3 0.3 12.8 6.2 13% 16% 8% 11% E E

TRGYO 6.45 3,225 5.65 U.R D -1.1 2 1.2 21 40 2% 10% 2% 1,619 2,886 934 2,509 471 1,581 7,539 10,328 2.0 1.1 0.4 0.3 12.8 3.8 24% 32% 15% 22% E E

REITs 4.0 2.8 0.4 0.3 12.8 5.5 15% 18% 9% 12%

Equity ₺ P/E P/BVNet Income ₺ Net Sales ₺


2017 E

st./A

ct.

2018 E

st./A

ct.

ROAROEEV/EBITDAEBITDA ₺

PETKM 6.48 9,720 7.99 7.57 23 O.P M 2.5 5.7 34 48 54 5% 77% 9% 1,156 1,173 6,910 8,004 1,560 1,775 3,625 3,964 8.4 8.3 2.7 2.5 7.0 6.1 35% 31% 17% 15% E E

ALKIM 23.08 571 33.80 21.30 46 O.P M -5.4 -2.5 1 38 29 4% 53% 3% 52 57 390 433 89 101 242 270 11.0 10.0 2.4 2.1 6.9 6.1 22% 22% 15% 15% E E

Chemicals 9.7 9.2 2.5 2.3 6.9 6.1 29% 27% 16% 10%

ALKA 4.21 221 1.92 U.R D -6.4 -3.6 0.7 20 5.3 8% 100% 3% 16 17 200 216 29 32 108 102 14.0 12.9 2.0 2.2 8.3 7.6 14% 16% 9% 9% E E

Paper 14.0 12.9 2.0 2.2 8.3 7.6 14% 16% 9% 9%

LOGO 56.30 1,408 64.60 54.04 15 M.P M -0.5 2.5 0.6 65 63 4% 79% 2% 66 91 280 324 93 121 204 259 21.4 15.5 6.9 5.4 15.4 11.8 36% 39% 20% 24% E E

Technology 21.4 15.5 6.9 5.4 15.4 11.8 36% 39% 20% 24%

YATAS 25.26 1,081 33.54 21.02 33 O.P M 18 22 2.6 58 49 0% 63 90 798 1,070 110 151 171 262 17.1 12.0 6.3 4.1 10.2 7.4 45% 42% 15% 16% E E

Furniture 17.1 12.0 6.3 4.1 10.2 7.4 45% 42% 15% 16%

MAVI 51.55 2,560 62.50 60.11 21 M.P D -8.3 -5.5 1.8 53 87 0% 94 117 1,706 2,046 241 289 238 333 27.2 21.9 10.7 7.7 11.2 9.4 49% 41% 10% 11% E E

Textile 27.2 21.9 10.7 7.7 11.2 9.4 49% 41% 10% 11%




2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld E

st.

AKBNK 9.06 36,240 10.61 10.20 17 M.P M -7.5 -4.6 45 50 69 2% 18% 2% 5,807 6,518 182,054 209,080 10,216 11,367 36,995 41,626 6.2 5.6 1.0 0.9 3.5 3.2 17% 17% 20% 17% E E

ALBRK 1.15 1,035 1.32 1.52 15 U.P D -13 -10 0.7 20 40 3% 12%

GARAN 9.66 40,572 12.72 10.06 32 O.P M -6.9 -4.1 105 50 76 2% 18% 3% 6,007 7,389 176,246 199,360 13,754 15,180 40,541 46,825 6.8 5.5 1.0 0.9 2.9 2.7 16% 17% 23% 20% E E

HALKB 9.50 11,875 13.14 15.70 38 M.P D -21 -18 67 49 84 2% 12% 4% 4,101 4,406 177,965 211,509 8,064 8,784 25,475 28,959 2.9 2.7 0.5 0.4 1.5 1.4 18% 16% 7% 6% E E

ISCTR 6.18 27,810 N.R -12 -9.1 31 31 76 3% 21%

TSKB 1.37 3,288 1.77 1.67 29 O.P M -3.5 -0.6 3.1 39 56 2% 18% 2% 581 677 959 1,123 3,473 4,042 5.7 4.9 0.9 0.8 3.4 2.9 18% 18% E E

VAKBN 5.62 14,050 7.69 7.18 37 O.P M -13 -10 22 25 89 1% 5% 4% 3,765 4,057 146,684 162,837 8,642 9,757 23,282 26,908 3.7 3.5 0.6 0.5 1.6 1.4 18% 16% 10% 9% E E

YKBNK 4.12 17,910 5.26 4.90 28 O.P M -7.8 -5 26 18 55 2% 16% 3% 3,592 4,021 172,739 196,098 8,721 10,309 30,223 33,191 5.0 4.5 0.6 0.5 2.1 1.7 13% 13% 10% 9% E E

Banking 5.3 4.7 0.8 0.7 2.5 2.2 17% 16% 10% 9%

AKGRT 3.15 964 2.12 2.20 -33 M.P 1.3 4.4 0.6 28 71 5% 75% 87 468 11.1 2.1 18% E

ANHYT 6.95 2,989 8.21 8.21 18 O.P M 2.2 5.3 0.1 15 61 4% 62% 5% 246 259 997 1,184 12.1 11.5 3.0 2.5 27% 24% E E

ANSGR 2.84 1,420 4.50 4.50 58 O.P M 0 3.1 0.1 42 20 3% 32% 2% 138 164 1,478 1,711 10.3 8.6 1.0 0.8 10% 10% E E

Insurance 11.1 10.1 2.1 1.7 18% 17%

ROAROEP/NIIEquity ₺ P/ENet Income ₺ Deposit ₺ NII ₺ P/BV


2017 E

st./A

ct.

2018 E

st./A

ct.

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Ticker Price ₺

M.C

ap. ₺

Targ

et P

rice

Pre

v.T

P

Upsid

e P

ot.%

Rec.

Rec.C

hange

1M

TL P

erf

.

1M

Rel.

Perf

.

AD

V 3

M

Flo

at %

Fore

ign

5Y

Avg.D

iv.Y

.

5Y

Avg.P

ay.%

Div

.Yie

ld E

st.

ALARK 7.07 1,580 8.50 7.20 20 O.P M -5.1 -2.2 3.1 30 45 3% 14% 4% 121 158 938 1,158 107 136 1,390 1,558 13.1 10.0 1.1 1.0 11 9.0 10% 11% 5% 6% E E

ENKAI 5.90 27,140 6.70 6.26 14 O.P M 7.5 11 3.2 12 74 3% 38% 4% 2,609 2,713 10,930 16,041 2,714 3,476 22,168 24,133 10.4 10.0 1.2 1.1 8.5 6.7 12% 12% 9% 9% E E

KCHOL 16.74 42,451 20.50 18.20 22 O.P U 0.4 3.5 17 26 87 2% 19% 3% 4,732 5,067 93,796 115,321 9,200 9,549 29,375 32,924 9.0 8.4 1.4 1.3 6.2 5.9 17% 16% 5% 5% E E

SAHOL 10.75 21,934 13.60 13.15 27 O.P M 3.8 6.9 19 47 73 1% 12% 2% 3,304 3,886 39,937 45,129 8,740 10,107 26,042 29,521 6.6 5.6 0.8 0.7 30.6 26.4 13% 14% 1% 1% E E

SISE 4.44 9,990 5.59 5.50 26 O.P M 3.7 6.9 5.5 34 45 2% 23% 3% 977 1,167 10,300 11,330 2,135 2,506 9,360 10,293 10.2 8.6 1.1 1.0 5.9 5.0 11% 12% 5% 6% E E

TKFEN 14.92 5,520 13.40 12.50 -10 M.P M 16 20 4.6 50 76 3% 42% 3.9% 622 624 7,445 8,658 737 861 2,781 3,187 8.9 8.8 2.0 1.7 5.1 4.4 24% 21% 8% 7% E E

YAZIC 21.48 3,437 29.00 27.20 35 O.P M -1.5 1.6 0.8 24 63 1% n.a 1% -24 120 4,011 4,562 481 571 4,046 4,143 -145.4 29 0.8 0.8 16.8 14.2 -1% 3% 0% 1% E E

Conglomerates 9.0 8.8 1.1 1.0 8.5 6.7 12% 12% 5% 6%

ROA


P/BV EV/EBITDA ROENet Income ₺ Net Sales ₺ EBITDA ₺ Equity ₺ P/E

2017 E

st./A

ct.

2018 E

st./A

ct.



57Disclaimer

The information in this report is prepared by “IS YATIRIM MENKUL DEGERLER A.S.” (IS Investment) and it is not to be construed as an offer orsolicitation for the purchase or sale of any financial instrument or the provision of an offer to provide investment services. Information, opinionsand comments contained in this material are not under the scope of investment advisory services. Investment advisory services are givenaccording to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investmentbanks and the clients. Opinions and comments contained in this report reflect the personal views of the analysts who supplied them. Theinvestments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors.Therefore, making decisions with respect to the information in this report cause inappropriate results.

All prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any form ofreproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this report is strictly prohibited. Theinformation presented in this report has been obtained from sources believed to be reliable. IS Investment cannot be held responsible for anyerrors or omissions or for results obtained from the use of such information.

İŞ INVESTMENT Stock Recommendation Methodology

Upside Potential >10% : BUY

5< Upside potential < 10% : HOLD

Upside potential < 5% : SELL

+/- 5% Analyst judgment at each boundary

Documents

Turkey Equity Strategyrapor.isyatirim.com.tr/2_20171122162852800_1.pdf3 MSCI Turkey index trades at 12m forward P/E ratio of 7.8x, at 38% discount compared to the MSCI EM index trading