Into 2025, we expect that many companies will navigate a difficult consumer landscape, striving to balance growth with limited price increases. We expect consumer-focused companies to find it challenging to sustain stable margins amid visible disinflation, with tightening pressures expected to persist in the first half of the year despite potential rate cuts. Real earnings growth opportunities are limited, with standout performers like BIM, Migros, Ford Otosan, and Tofas Fabrika.
However, we believe value opportunities exist, as valuations are still low, offering approximately a 40% discount to 10-year averages and a 30% discount compared to international peers based on 2026 JPMe P/E and EV/EBITDA. For further rerating from these levels, a combination of earnings growth and timely rate cuts to reduce risk premiums is needed, in our view. In response to these dynamics, we have updated our recommendations and price targets: upgrading Migros to Overweight, downgrading SOK and Coca Cola Icecek to Neutral. Our top picks include BIM, Migros, Ford Otosan, and Arcelik. With this report, we also introduce our new IAS’29 models, which may improve the reliability of assessing valuation opportunities in an environment where consensus is mixed due to the diverse set of accounting rules applied in estimates.
Managing the expected inflation drop
As Türkiye transitions to a disinflationary period, with inflation expected to drop from 44.5% in 2024 to 26% in 2025 (JPMe Macro team), companies that previously thrived under a high inflation environment now face margin pressures. While this challenge is expected to persist, food retailers have opportunities to grow EBITDA ahead of inflation thanks to staff costs offsetting gross margin pressure, staples may struggle with pricing to balance growth, and discretionary companies could rebound from their lows due to scale advantages and favorable TL, despite a growing share of low margin exports.
Food Retailers remain a safe haven, offer HSD% real earnings growth
Despite intense competition, we expect BIM to excel in cash flow generation, and both BIM and Migros are well-positioned to benefit from the growing modern retail channel, potentially achieving ~10-12% real topline growth. BIM has the most upside on revenues thanks to consumers trading down, while Migros will remain competitive and benefit from its relatively more resilient consumer income group and diversified business model. We downgrade SOK to N despite its low valuation, preferring to wait for evidence that its new store strategies are picking up quickly to create profitable operational leverage.
The start of a growth phase for exporters
Arcelik is our top turnaround story, with restructuring efforts starting to pay off, improved cash flow financing as rate cuts begin, and ongoing volume growth, particularly in Europe. We estimate 14% year-over-year export volume growth for Ford Otosan, with margins rebounding due to scale and reduced inventory impact, which we forecast will show LDD% EBITDA growth.
We expect Tofas to show the highest earnings growth though from a low base, and earnings still remain unattractive, while a potential acquisition of Stellantis Türkiye distribution and the launch of new K zero model are mostly priced in, in our view.
Downgrade Coca Cola Icecek to N
We expect another year of flat volume performance, which undermines the superior growth profile of Icecek compared to Global bottlers. Valuations remain reasonable but less attractive, with shares at 6.8x 2025E inflation unadjusted EV/EBITDA, reflecting a 20% discount to global peers. A re-rating would require improved volume outlook and reduced risk premiums, which we don’t foresee in the first half of the year.
Key risks / catalysts include wage adjustments, while inflation accounting is a hurdle for valuations, clouding the earnings outlook.
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