Deferred tax driven positive surprise in the bottom-line despite weaker than expected operational performance: Migros’ 4Q22 revenues materialised at TL24.5bn (+136% y/y), other exc. EBITDA became TL1.55bn (+108% y/y) and net income was TL1.16bn (4Q21 net loss was TL8mn hit by CB fine provision of TL388mn). 4Q22 top-line beat expectations by 5% whereas EBITDA missed consensus by 12% with 6.3% actual EBITDA margin versus anticipated 7.6%. Net income of TL1.16bn included deferred tax income boost of TL916mn and beat consensus figure of TL472mn. We keep our Outperform rating with a revised 12M TP of TL222.00/share (previous TL207.00) after guidance release and improved net cash position. Our 2023 revenue estimate is revised up by 16%, EBITDA and NI estimate were revised down by 3% and 6%, respectively on cautious margin guidance. Retailer’s results call is today at 15:00 local time.
2023 guidance was shared: Sales growth of 75-80% y/y (2022 actual: 105% y/y), other exc. EBITDA margin of 7-7.5% (2022: 8.0%), expansion target of 365 new stores and capex of TL4bn (2022: TL2.26bn). As per our calculations, mid of guidance range is respectively 17% and 3% above 2023E Bloomberg revenue and EBITDA consensus estimates due to consensus revenue’s implied 51% annual top-line growth with respect to actual results but relatively higher 2023 EBITDA margin expectation of 8.2%.
4Q22 top-line increased by 136% y/y to TL24.5bn: Inflation, competitive shelf pricing and strong tourism should have contributed to the top-line performance. In 2022, Migros’ total share in total modern FMCG market became 15.8% up by 30bps y/y. Migros’ end-2022 total number of stores and sales area became 2,908 and 1,796sqm, respectively, with net store additions of 343 y/y and annual space growth of 7.0%. Online service stores increased to 956 (end-9M22:931/ end-2021: 867). 4Q22 online sales reached TL3.4bn up by 134% y/y and 105% in 2022. Online share in consolidated 2022 top-line exc. tobacco and alcohol materialised at 15.6%.
4Q22 other exc. EBITDA margin became 6.3%, down by 86bps y/y: Migros’ 4Q22 gross margin receded by 190bps y/y to 21.5% and is stated to be related to investing in pricing to support cash-strapped consumers.
2022 capex became TL2.26bnn, implying capex/sales of 3.0x, higher than 2021’s 2.7x. 2022’s capex breakdown shows that 39% was related to new stores and DC’s, 33% on maintenance and 28% on IT, R&D, energy sustainability.
End-2022 net cash became 661mn and improved compared to end-3Q22’s net cash of TL116mn and end-2021’s net debt of TL2.45bn. Working capital/ trailing sales was -12.9% (end-3Q22: -12.9%, end-2021: -13.0%). As of end-2022, the retailer has net long FX position of TL619mn (end-3Q22: TL300mn/ end-2021:TL212mn).
Footnote about the stores affected by the recent earthquake: As of 31 January 2023, Migros had 2,927 stores in Turkiye and 228 stores, all of which are leased and insured, in the 10 cities affected by the earthquake. In the current situation, an evaluation shows that 41 of these stores became unusable. This number may change based on additional evaluations. The 2022 turnover of these 41 stores was TL631 million (c0.8% of 2022 revenues). Insurance pre-evaluation processes have started for these stores and their products and fixtures, and for some other stores in the region.
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