Equity / Small Cap. / Cement & Concrete
08/04/2014
Adana Cimento (A)
MARKETPERFORM
Company Update
(Previous: U.P)
Upside Potential
9%
New capacities partly absorbed by export markets
Investment Positives
Ticker
In 2013 Adana’s revenues increased by 37%. Domestic sales increased
by 26% while export turnover hiked by 106%, thanks to the improvement in
Libyan demand. Previously political unrest in North Africa forced contractors
to suspend the construction activities and consequently cement demand
from North Africa took a halt. In 2013 Libyan exports recovered and
company’s overall exports reached 600K tons in 2013 from 330K tons in
2012. An intensive reconstruction in Syria provided that the civil war ends is
the major upside risk to our valuation. Adana may export up to 500K ton
cement to Syria when the country stabilizes.
Stock Data
Improvement in export markets softened domestic competition and
leading to improved domestic prices. The company is supplying cement
for the Cukurova Airport Project, and seeks further infrastructure projects in
the region. Construction of Akkuyu Nuclear Power Plant is expected to
support domestic demand in the next years (Estimated use of RMC is 2mn
m3 corresponding to 600K tons cement).
P/E
P/BV
EV/EBITDA
TL
US$
Price at 07 04 2014
3.90
Target Price
4.26
Prev.Target Price
3.80
Mcap (mn)
344
Float Mcap (mn)
198
Avg.Daily Volume (3M, mn)
0.3
No. of Shares Outstanding (mn)
Free Float (%)
Multiples
2014E 2015E
1.84
1.94
1.73
162
93
0.1
88
57.69
2016E
Price Perf. (%)
12.8
2.2
7.9
13.0
2.1
7.6
n.a
n.a
n.a
1 Mn
3 Mn
12 Mn
7
10
-7
7
10
0
0
-15
13
TL
US$
Relative to BIST-100
Located in Mediterranean region where supply exceeds demand.
Although there are several hydro and thermal power plants, hotels, malls Price / Relative Price
and residential investments in the region, there is still a clear oversupply 6.00
which became more visible after the MENA demand eased in 2012.
140
120
5.00
100
4.00
80
3.00
60
2.00
40
ADANA Cl ose (LHS)
Relative to BIST1 00
Going forward we expect capacity additions to hit Adana’s domestic sales,
52 Week Range (Close TL)
which may be partially balanced through growth in exports markets.
Following capacity additions in the region, we project Adana’s total sales Foreign Share (%)
volume to decline by 6% and 15% in 2014 and 2016, respectively.
6.6
3.35
4.49
6.4
6.2
6
20/03
06/03
23/01
09/01
20/02
Foreign Sh are (%)
3M Ave rage
5.8
06/02
Despite capacity additions in the region we upgrade the stock to
MARKETPERFORM on the back of valuation. Adana-A type of shares
offers 9% upside potential. Favourable weather conditions in the first quarter
will lead to strong financial results and play as catalyst for cement
companies.
03/14
01/14
11/13
Outlook and Valuation
09/13
0
07/13
0.00
05/13
20
03/13
1.00
01/13
Additional capacity from competitors to put pressure on prices and
may cause price wars in domestic and export markets in the next
years. Kipas’ 1.2mn ton additional capacity, to become fully operational this
year, is expected to have an adverse affect on Adana. Additionally Sancim
and Eren Holding are building 1.5mn ton and 3.5mn ton clinker capacities,
respectively, in the region which will become on stream in 2015 and 2016,
respectively.
03/04
Investment Negatives
ADANA
Ceren Atalay
[email protected]
+90 212 350 25 18
Please refer to important disclaimer at the end of this report.
1
Adana Cimento (A)
Summary of Key Financials (TL mn)
Sum m ary of Key Financials (TL m n)
2
3
Incom e Statem ent (TL m n)
2012A* 2013A*
Revenues
157
214
EBITDA
38
53
Net income
48
37
Balance Sheet (TL m n)
Tangible Fixed Assets
65
66
Cash & equivalents
18
13
Total assets
192
189
Short-term debt
16
0
Total Debt
16
1
Total equity
163
172
Ratios
Net debt/EBITDA (x)
-0.1
-0.2
EBITDA Margin
24.4
24.7
Net Margin
30.5
17.1
Valuation Metrics
EV/EBITDA (x)
8.7x
6.0x
P/E (x)
6.6x
9.8x
Dividend yield (%)
10%
6%
*based on average Mcap during the year
4
5
2014E 2015E
216
232
52
55
40
42
Source: Is Investment Estimates
6
2016E
208
45
33
62
19
202
11
12
174
62
18
215
48
49
148
62
21
224
70
70
138
-0.1
24.0
18.4
0.6
23.9
18.1
1.1
21.6
15.9
6.4x
8.7x
10%
6.0x
8.2x
13%
7.4x
10.4x
16%
 Company Overview
Adana Cimento Sanayii T.A.S. is a Turkeybased company engaged in the manufacture
and w holesale of cement, clinker and readymix concrete. The Company?s products
include Portland cement, w hite Portland
cement and composite cement, among
others.
 Shareholder Structure
42.8%
57.2%
Ordu Yardimlasma Kurumu
2
Other
0
Beverages
OP
MP
UP
UR
4.00
12M Trailing EV/EBITDA
3
Real Estate Investment Trust
Sectoral Recommendations
6
5
4
3
8
7
4
Estimated Forward EV/Sales
20
OUTPERFORM
NOT RATED
MARKETPERFORM
Number of
Companies
18
54
2
3
1
UNDER REVIEW
UNDER PERFORM
Source : BIST/ Is Investment Estimates
12M Trailing EV/Sales
Rec. Breakdown for Coverage (%)
31/03/2014
10/03/2014
31/03/2014
10/03/2014
17/02/2014
2.60
17/02/2014
2.80
15.00
27/01/2014
17.00
27/01/2014
Estimated Forward P/BV & Current P/BV
06/01/2014
16/12/2013
25/11/2013
04/11/2013
Estimated Forward P/E & 12M Trailing P/E
06/01/2014
Estimated Forward P/BV
Source : BIST/ Is Investment Estimates
16/12/2013
25/11/2013
04/11/2013
14/10/2013
23/09/2013
02/09/2013
12/08/2013
22/07/2013
01/07/2013
10/06/2013
20/05/2013
29/04/2013
08/04/2013
03/14
03/14
02/14
02/14
01/14
01/14
01/14
12/13
12/13
11/13
11/13
10/13
10/13
09/13
09/13
08/13
08/13
07/13
07/13
07/13
06/13
06/13
05/13
05/13
04/13
04/13
03/13
03/13
02/13
02/13
01/13
UP
UP
UR
UP
UP
UP
UP
UP
UP
UP
120
14/10/2013
23/09/2013
02/09/2013
12/08/2013
22/07/2013
01/07/2013
5.00
Conglomerate
6.00
10/06/2013
7.00
20/05/2013
8.00
Utilities
9.00
Banking
10.00
29/04/2013
11.00
Petroleum and Energy
12.00
08/04/2013
9.00
Airlines&Ground Handling…
NR
31/03/2014
10/03/2014
17/02/2014
27/01/2014
06/01/2014
16/12/2013
25/11/2013
04/11/2013
14/10/2013
23/09/2013
02/09/2013
12/08/2013
22/07/2013
01/07/2013
11.00
Food
1.40
10/06/2013
13.00
Glass
Source : BIST/ Is Investment Estimates
31/03/2014
12M Trailing P/E
Transportation
Agricultural Chemicals
10/03/2014
17/02/2014
27/01/2014
06/01/2014
1.60
5.00
20/05/2013
01/13
125
Construction
Iron Steel
Technologly
Retail Trade
7.00
29/04/2013
01/13
TL
16/12/2013
25/11/2013
08/04/2013
130
Automotive & Parts
Estimated Forward EV/EBITDA
Media
04/11/2013
14/10/2013
23/09/2013
02/09/2013
12/08/2013
22/07/2013
01/07/2013
10/06/2013
20/05/2013
29/04/2013
08/04/2013
Estimated Forward P/E
Source : BIST/ Is Investment Estimates
Mining
Chemicals
Communication
Livestock
Other
Cement & Concrete
Integrated Textile
Insurance
Pharmaceutical and Health
Auto part
Tyre Production
9
Paper
10
Consumer Durables
135
Leasing & Factoring
Adana Cimento (A)
Price / Recommendations
115
110
105
100
95
90
Source : BIST/ Is Investment Estimates
Relative to BIST1 00
2.40
2.20
2.00
1.80
Current P/BV
Estimated Forward EV/EBITDA&12M Trailing EV/EBITDA Estimated Forward EV/Sales & 12M Trailing EV/Sales
2.80
2.60
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
Adana Cimento (A)
This report has been prepared by “İş Yatırım Menkul Değerler A.Ş.” (İş Investment) solely for the information of clients of İş Investment.
Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services
are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies,
investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who
supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be
suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and
with the assistance of independent advisors, as they believe necessary.
The information presented in this report has been obtained from public institutions, such as Istanbul Stock Exchange (ISE), Capital
Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of
Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is
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4
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Adana Cimento (A)