With this report, following our earnings preview on banks and insurance companies that we previously published, we reviewed earnings outlook of 24 non-financial companies under our coverage.
We did not disclose our forecasts for retailers, operating on a thin profit margin, due to the difficulty of making sound quarterly forecasts amidst the effects of inflation accounting in light of monthly inflation data showing high volatility. Naturally, since financial results contain strong seasonality, especially in non-financial companies, comparison with the previous quarter will not be meaningful. However, since we did not have last year’s inflation adjusted 2Q results, we had to present our forecasts side by side with the 1Q24 results.
Turkcell, Logo, Lokman Hekim and Medical Park look relatively better
According to our forecasts, there will be a q/q increase of 12% in net sales, increase of 36% in EBITDA and increase of 67.5% in net earnings. Ironically, THY and Pegasus, which actually accounts most of q/q earnings growth in 2Q24, are likely to see some earnings contraction on a y/y basis. On the other hand, we estimate that Turkcell, Logo, Lokman Hekim and Medical Park will maintain a strong y/y earnings momentum while having better scores in 2Q24 than in 1Q24.
In terms of 2Q24 results, sectoral dynamics favour telecom, food retailing and healthcare services sectors
We expect the prevailing delayed effects of subscription renewals in an inflationary environment to have a positive impact on sales volumes and earnings at telecom companies. We like Turkcell’s results in this sector. Another sector where we think price adjustments and relatively strong demand will positively affect growth is food retailing. We estimate that BİM will continue to differentiate positively in terms of growth and profitability in this sector in this quarter. On the healthcare side, SSI and TMA price adjustments in line with inflation have a similar effect on hospital turnovers. Lokman Hekim and Medical Park are companies from the sector that we expect to announce strong results.
On the other hand, despite company specific differentiations, the consumer durables and automotive sectors continue to be negatively affected by the contractionary effects of monetary tightening on demand
In these sectors, we generally expect sales volumes to decrease annually in real terms and profits to shrink. We do not expect a strong momentum on the iron and steel sector, either. We estimate that sales volumes in this sector will remain flat and the shrinking steel – input spread will result in a weakening operating performance compared to the previous quarter. The delayed revenge travel tendency we saw in the aviation industry after the pandemic started to lose momentum from 4Q23 onwards and increasing personnel costs are suppressing profitability. We think that this situation will cause a general weakening in companies’ 2Q24 profits.
Reporting season for non-financial companies will be concentrated in August. Financial results in non-financial companies already started with TAV. Following our report, we expect Arçelik to announce results on July 30 and Otokar on July 31. According to the IR guidance, the announcements of financial results in non-financial companies will be mostly in August and continue until mid-September. The last day of 2nd quarter reporting season is September 30.
Follow our English language YouTube videos @ REAL TURKEY: https://www.youtube.com/channel/UCKpFJB4GFiNkhmpVZQ_d9Rg
And content at Twitter: @AtillaEng
Facebook: Real Turkey Channel: https://www.facebook.com/realturkeychannel/