TURKEY MARKET OUTLOOK

Transcription

1 BNP PARIBAS 23 JANUARY 2017 EQUITIES RESEARCH TURKEY MARKET OUTLOOK 4Q16 earnings preview The final quarter of 2016 saw a 17.5% leap in USDTRY, coupled with a 1.2ppt rise Non-banks financial highlights in the benchmark bond rate that will have brought down earnings of both nonfinancials and to a lesser extent banks q-q, in our view. Non-financials should have fared a tad better than banks if we focus on y-y operational earnings evolution, with 12% EBITDA growth, thanks to the corporates with hard currency income streams and cash costs partially denominated in TRY. We expect banks, on the other hand, to see their recurring earnings increase 10% y-y in 4Q. While the weaker TRY has had a positive contribution on core operational profit expansion of non-bank corporates, the bottom line will have moved down substantially y-y on FX losses, due to their high FX indebtedness. While banks have the potential to beat our forecasts for the final quarter, we expect them to set aside additional provisions and also frontload some expenses, to allow scope for earnings growth in Even if this happens, we still expect the sector to post a solid 42% y-y EPS growth for full year 2016 vs only 6% a year earlier. TSKB will be the first bank to report for 4Q, on 27 January, and Arcelik the first non-financial to report, on 3 February. Among banks, we expect Isbank to post the best q-q operating profit expansion for the final quarter, followed by Halkbank and Akbank among large caps, while YKB, Vakifbank and Garanti are likely to be the laggards. We expect YKB, Halkbank and Garanti to expand their TRY loans over the sector s 3.8% quarterly growth and gain market share. Halkbank is likely to report the best spread evolution, as we expect it to have financed its above-sector TRY loan growth through FX deposits, unlike other banks that match the currencies. Among the non-financials we expect those with FX income streams to benefit the most in terms of y-y EBITDA growth. Companies in contracting, steel and glass sectors are leading in that respect, while aviation companies, REITs and cement sector should see deterioration in their core operational performances y-y. Official deadlines to post 4Q16 financial statements Company type Solo Consolidated Banks Non-Banks Source: Central Registry Agency 4Q16E Change (q-q %) (y-y %) Revenues EBITDA (7.3) 11.6 Net Profit (29.8) (47.7) KCHOL TI and SAHOL TI excluded in order to avoid double counting in aggregate earnings and their substantial banking businesses Source: TEB Investment/BNP Paribas estimates Banks financial highlights 4Q16E Change (q-q %) (y-y %) Net interest inc Net op. inc. (10.5) 2.5 Rep. Net profit (8.2) 11.2 Rec. Net profit (16.3) 10.4 Source: TEB Investment/BNP Paribas estimates Macro indicators 4Q15 3Q16 4Q16 USDTRY (Chg, %, avg) USDTRY (Chg, %, eop) (3.5) EURTRY (Chg, %, avg) EURTRY (Chg, %, eop) (6.2) Brent (USD,avg) Brent (USD,eop) Benchmark bond yield (%, avg) Benchmark bond yield (%, eop) PMI (avg) PMI (eop) Source: TEB Investment/BNP Paribas estimates mete.yuksel@tebyatirim.com.tr Our research is available on Thomson One, Bloomberg, TheMarkets.com, FactSet and on Please contact your salesperson for authorisation. Please see the important notice on the back page. PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): TEB INVESTMENT. THIS REPORT IS DISTRIBUTED IN TURKEY BY TEB INVESTMENT AND OUTSIDE TURKEY JOINTLY BY TEB INVESTMENT AND BNP PARIBAS. THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 30

2 Banks We expect aggregate net income of the banks in our coverage to decrease 8% q-q, but increase 11% y-y in 4Q16, leading to 42% y-y net income growth for While we forecast a slight improvement in core spread, we expect NIM to come down around 20bp q-q, on lower CPI linker income. Fee income growth we expect to reach 7% y-y, despite a lack of account maintenance fees. We forecast specific CoR to remain almost flat q-q, though some banks may prefer to bring forward some expenses (provision expenses & opex) following high net income growth in 2016, to set a lower net income base for 2017 growth. Trading gains should contribute to the bottom line, with the help of lower swap costs and mark-to-market gains from longterm swap contracts. We forecast general provision expenses to almost double due to high nominal loan growth. On the balance sheet side, loans and deposits grew 7.7% (TRY loans +3.8%, FX loans -1.3%) and 8.6% (TRY deposits +3.2%, FX loans -0.6%) q-q respectively. Exhibit 1: Banking sector growth q-q y-y Loan growth (%) LC (TRY m) FC (USD m) (1.3) 5.9 Deposit growth (%) LC (TRY m) FC (USD m) (0.6) (4.8) Sources: BRSA; TEB Investment/BNP Paribas calculations Exhibit 2: Bank s reporting calendar Company BBG code Expected announcement date TEB Net profit forecast (TRY m) Akbank AKBNK TI 31-Jan 1,087 Al Baraka Turk ALBRK TI week of 20 Feb 46 Garanti Bank GARAN TI Jan 1,091 Halkbank HALKB TI 2nd week of Feb 686 Isbank ISCTR TI Jan 1,226 TSKB TSKB TI 27-Jan 103 Vakifbank VAKBN TI 20-Feb 616 Yapi Kredi Bank YKBNK TI 2-Feb 567 Sources: Banks' IR guidance; TEB Investment/BNP Paribas estimates 2 BNP PARIBAS 23 JANUARY 2017

3 Exhibit 3: Banks comparison 4Q16E AKBNK GARAN YKBNK ISCTR HALKB VAKBN TSKB ALBRK Loan growth (q-q %) LC (TRY m) FC (USD m) (5.2) (4.8) 0.7 (1.3) (0.8) 0.7 (1.3) (0.3) Deposit growth (q-q %) n.a LC (TRY m) (5.5) (0.9) (1.7) n.a. 7.1 FC (USD m) 2.9 (8.2) (5.6) (6.0) 8.9 (1.7) n.a. (19.4) Opex growth (y-y %) (2.1) (9.4) (3.0) NFI growth (y-y %) (12.4) (31.8) 0.8 Total L/D Spread (q-q) (10) 0 (15) NIM-reported (q-q) (50) (20) (35) 0 (5) (20) (45) 0 Specific CoR (bp) 4Q16E Q Q NPL ratio (%) 4Q16E Q Q Operating revenues (TRY m) 4Q16E 3,177 3,755 2,731 4,050 2,468 2, Q16 3,053 3,715 2,805 3,568 2,354 2, Q15 2,461 2,691 2,131 2,604 1,569 1, q-q (%) y-y (%) Net Profit (TRY m) 4Q16E 1,087 1, , Q16 1,105 1, , Q Change (q-q %) (1.6) (18.0) (30.0) (24.7) (12.1) (8.1) Change (y-y %) (10.6) (6.2) (9.9) (49.2) Sources: TEB Investment/BNP Paribas estimates 3 BNP PARIBAS 23 JANUARY 2017

4 Akbank (AKBNK TI; BUY; CP: TRY8.31; TP: TRY9.68) Analyst: Duygun Kutucu, , Akbank will announce 4Q16 results on 31 January. We estimate TRY1,087m bankonly net profit for 4Q16, corresponding to a 2% q-q contraction and 20% y-y growth. Despite our expectation of flat q-q L/D spread, we estimate 50bp contraction in NIM as the bank will reflect the impact of lower CPI realisation compared with its 8% estimate used in CPI linker valuations for the financials in this quarter. Net fee income growth we expect to accelerate to 7% y-y with the help of higher loan growth. Opex growth we expect to remain below inflation at 7%. We estimate a TRY350m net trading gain on the back of mark-to-market gains from swap contracts. While we do not anticipate an increase in specific CoR, general provision expenses are set to rise due to higher loan growth. Exhibit 4: Akbank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 2,119 2,076 2, (1.5) II. Net Fee Income III. Provisions Loan Loss Provisions (3.0) 18.0 Other IV. OPEX 1,069 1,102 1, HR Non-HR V. Net Operating Income (I+II-III-IV) 1,098 1, (8.0) (14.9) VI. Net Trading Gain/Loss (20) nm VII. Other Income VIII. Income From Participations nm 11.5 IX. Pre-tax Income 1,165 1,413 1,409 (0.3) 20.9 X. Net Profit 909 1,105 1,087 (1.6) 19.6 Recurring Net Profit 1,004 1,205 1,095 (9.1) 9.1 Balance sheet Loans 141, , , LC 92, , , FC (USD m) 16,749 16,753 15,874 (5.2) (5.2) Security Portfolio 54,876 52,326 56, Assets 234, , , Deposits 138, , , LC 68,696 86,356 81,566 (5.5) 18.7 FC (USD m) 24,073 21,647 22, (7.5) Equity 26,689 29,935 31, Sources: Akbank; TEB Investment/BNP Paribas estimates 4 BNP PARIBAS 23 JANUARY 2017

5 Garanti Bank (GARAN TI; BUY; CP: TRY7.80; TP: TRY9.22) Analyst: Duygun Kutucu, , Garanti will announce 4Q16 results on January. We estimate TRY1,091m bank-only net profit for 4Q16, corresponding to an 18% q-q contraction and a 16% y- y growth. We expect NIM to contract 20bp q-q due to lower contributions from CPI linkers. Fee income growth momentum is gaining pace, in our view, as we forecast 13% fee income growth y-y. Opex will be elevated due to the year-end impact and losses from the sale of Garanti Moscow, and we foresee 12% y-y opex growth. Trading losses we expect to decline due to lower swap utilisation and declining swap rates. Similar to the trend in the sector, we anticipate a decline in specific CoR, though general provisions should surge as a result of depreciation of TRY. Exhibit 5: Garanti Bank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 2,636 2,881 2, II. Net Fee Income III. Provisions (16.1) (1.6) Loan Loss Provisions (13.6) (10.8) Other (27.1) IV. OPEX 1,574 1,418 1, HR Non-HR , V. Net Operating Income (I+II-III-IV) 1,129 1,496 1,299 (13.2) 15.0 VI. Net Trading Gain/Loss (352) (108) (89) nm nm VII. Other Income (6.4) (50.6) VIII. Income From Participations (35.2) 0.3 IX. Pre-Tax Income 1,134 1,660 1,427 (14.0) 25.9 X. Net Profit 938 1,331 1,091 (18.0) 16.4 Recurring Net Profit 863 1,455 1,139 (21.7) 32.0 Balance sheet Loans 159, , , LC 100, , , FC (USD m) 20,145 20,114 19,157 (4.8) (4.9) Security Portfolio 44,124 42,684 45, Assets 254, , , Deposits 140, , , LC 66,421 71,924 76, FC (USD m) 25,523 26,334 24,182 (8.2) (5.3) Equity 30,981 34,466 35, Sources: Garanti Bank; TEB Investment/BNP Paribas estimates 5 BNP PARIBAS 23 JANUARY 2017

6 Isbank (ISCTR TI; BUY; CP: TRY5.57; TP: TRY6.92) Analyst: Duygun Kutucu, , Isbank is slated to announce 4Q16 financials towards the end of January. We forecast TRY1,226m bank-only net income for Isbank in 4Q16, corresponding to 17% q-q and a 39% y-y growth. Isbank uses forward-looking expectations in its CPI linker valuation, and will not be affected by the lower CPI reading in the quarter. Therefore, we expect Isbank to be the only bank not to have a q-q NIM contraction. The bank suffered from FX losses in 2Q16 and 3Q16, though we expect the trading line to turn positive in 4Q. Thanks to some hikes in fees and commissions last year, we expect continued strong fee income growth at 20% y-y, which might be the best fee income growth among all the banks we cover. We forecast opex to decline 9% y-y as the 4Q15 figure was inflated by a TRY277m provision for the pension fund deficit. No deterioration is expected in asset quality. Exhibit 6: Isbank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 2,466 2,821 2, II. Net Fee Income III. Provisions Loan Loss Provisions Other IV. OPEX 1,805 1,589 1, (9.4) HR Non-HR 1, (18.2) V. Net Operating Income (I+II-III-IV) 872 1,299 1, VI. Net Trading Gain/Loss (139) (230) 88 nm nm VII. Other Income (28.1) (38.8) VIII. Income From Participations nm nm IX. Pre-Tax Income 1,070 1,356 1, X. Net Profit 884 1,049 1, Recurring Net Profit 946 1,159 1, Balance sheet Loans 177, , , LC 114, , , FC (USD m) 21,898 23,117 22,816 (1.3) 4.2 Security Portfolio 46,044 49,965 52, Assets 275, , , Deposits 153, , , LC 73,229 87,091 88, FC (USD m) 27,611 26,338 24,766 (6.0) (10.3) Equity 32,035 35,020 36, Sources: Isbank; TEB Investment/BNP Paribas estimates 6 BNP PARIBAS 23 JANUARY 2017

7 Halkbank (HALKB TI; BUY; CP: TRY10.63; TP: TRY10.74) Analyst: Duygun Kutucu, , Halkbank is due to announce 4Q16 financials in the second week of February. We forecast TRY686m bank-only net profit for Halkbank in 4Q16, corresponding to 9% q- q and 6% y-y growth. We forecast above-sector growth in loans and deposits, with FX being the main growth driver on the deposit side. We expect the L/D spread to improve 30bp q-q with the help of a shift in deposit mix in favour of foreign currencies as well as lower TRY deposit rates. Despite this improvement in spread, we expect NIM to remain flat q-q due to lower CPI linker income. We anticipate fee income growth momentum will continue with 18% y-y expansion. Opex growth we expect to gain pace and reach 14% y-y. Similar to last quarter, we expect the bank may set aside additional general provisions that keep provision expenses at an elevated level. Exhibit 7: Halkbank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 1,481 1,881 1, II. Net Fee Income III. Provisions (16.2) Loan Loss Provisions Other (40) (45.8) nm IV. OPEX , HR Non-HR V. Net Operating Income (I+II-III-IV) (0.1) VI. Net Trading Gain/Loss (38.4) nm VII. Other Income (17.1) VIII. Income From Participations (100.0) 11.5 IX. Pre-tax Income X. Net Profit Recurring Net Profit 643 1, (31.7) 7.8 Balance sheet Loans 126, , , LC 87,246 97, , FC (USD m) 13,536 15,659 15,533 (0.8) 14.8 Security Portfolio 28,155 31,202 32, Assets 187, , , Deposits 122, , , LC 79,723 90,447 89,668 (0.9) 12.5 FC (USD m) 14,538 15,713 17, Equity 19,424 21,372 22, Sources: Halkbank; TEB Investment/BNP Paribas estimates 7 BNP PARIBAS 23 JANUARY 2017

8 Vakifbank (VAKBN TI; BUY; CP: TRY4.58; TP: TRY5.49) Analyst: Duygun Kutucu, , Vakifbank is due to announce 4Q16 financials around 20 February. We forecast TRY616m bank-only net profit for Vakifbank in 4Q16. We expect a 20bp NIM contraction due to lower CPI linker income and a slight contraction in spread, as Vakifbank s spread had benefitted from additional interest income recorded in 3Q16 from collection of an NPL. Acceleration in retail loan growth should help to bring y-y fee income growth to a strong 17%, according to our assumptions. We expect a slight increase in NPL ratio to 4.2%, on NPL inflows in the SME and retail side. We forecast general provision expenses to surge from TRY57m in 3Q16 to TRY191m, on the back of high nominal loan growth. Exhibit 8: Vakifbank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 1,542 1,913 1, II. Net Fee Income III. Provisions Loan Loss Provisions Other IV. OPEX , HR (0.4) 11.8 Non-HR V. Net Operating Income (I+II-III-IV) (24.7) (5.0) VI. Net Trading Gain/Loss ,869.4 VII. Other Income (24.1) (42.2) VIII. Income From Participations (98.9) 11.5 IX. Pre-Tax Income 817 1, (20.8) 0.1 X. Net Profit (24.7) (6.2) Recurring Net Profit (23.8) (9.7) Balance sheet Loans 123, , , LC 88,431 97,786 99, FC (USD m) 12,114 13,393 13, Security Portfolio 25,337 26,189 27, Assets 182, , , Deposits 109, , , LC 76,471 87,369 85,844 (1.7) 12.3 FC (USD m) 11,464 10,871 10,685 (1.7) (6.8) Equity 16,768 18,783 19, Sources: Vakifbank; TEB Investment/BNP Paribas estimates 8 BNP PARIBAS 23 JANUARY 2017

9 Yapi Kredi Bank (YKBNK TI; BUY; CP: TRY3.48; TP: TRY3.82) Analyst: Duygun Kutucu, , Yapi Kredi (YKB) is due to announce 4Q16 results on 2 February. We forecast TRY567m bank-only net profit for YKB in 4Q16, corresponding to 30% q-q and 11% y-y contractions, the deepest in our coverage, due to high general provision expenses and lower CPI linker income. After a relative slowdown in loan growth in 9M16, we expect YKB to have highest q-q loan and deposit growth among the large cap banks in our coverage this quarter. We forecast a 35bp q-q decline in NIM due to lower CPI linker income, despite a slight increase in core spread. Fee income we forecast to come down 12% y-y as the bank will miss account maintenance fees that contributed to fees in 4Q15. We forecast a 2% y-y decline in opex as the bank has cut down the number of branches significantly in recent quarters. We anticipate no major change in NPL inflows compared with the previous quarter. Exhibit 9: Yapi Kredi Bank Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income 1,933 2,036 1,968 (3.3) 1.8 II. Net Fee Income (12.4) III. Provisions Loan Loss Provisions (0.4) 12.9 Other IV. OPEX 1,345 1,310 1, (2.1) HR Non-HR (3.8) (9.8) V. Net Operating Income (I+II-III-IV) (33.2) (28.1) VI. Net Trading Gain/Loss (139) (60.2) nm VII. Other Income (31.9) VIII. Income From Participations (14.5) 21.1 IX. Pre-Tax Income (27.3) (9.1) X. Net Profit (30.0) (10.6) Recurring Net Profit (33.7) (20.1) Balance sheet Loans 148, , , LC 98, , , FC (USD m) 17,363 18,687 18, Security Portfolio 30,907 26,943 30, (0.9) Assets 220, , , Deposits 126, , , LC 67,191 77,339 85, FC (USD m) 20,465 19,429 18,345 (5.6) (10.4) Equity 23,084 25,021 25, Sources: Yapi Kredi Bank; TEB Investment/BNP Paribas estimates 9 BNP PARIBAS 23 JANUARY 2017

10 Al Baraka Turk (ALBRK TI; HOLD; CP: TRY1.21; TP: TRY1.22) Analyst: Duygun Kutucu, , Albaraka is due to announce 4Q16 results in the third week of February. We forecast TRY46m bank-only net profit for Albaraka in 4Q16, corresponding to 8% q-q and 49% y-y contraction. We expect specific CoR to remain at an elevated level, despite a 49% coverage ratio. Changes in CAR calculation methodology for participation banks will support the bank s CAR. Exhibit 10: Al Baraka Turk Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income II. Net Fee Income III. Provisions Loan Loss Provisions (8.6) 92.4 Other (11) (11) 27 nm nm IV. OPEX (3.0) HR (19.5) 0.6 Non-HR (6.6) V. Net Operating Income (I+II-III-IV) (72.0) (90.8) VI. Net Trading Gain/Loss VII. Other Income VIII. Income From Participations nm 11.5 IX. Pre-Tax Income (42.8) X. Net Profit (8.1) (49.2) Recurring Net Profit (9.2) (49.5) Balance sheet Loans 18,558 19,436 21, LC 15,352 15,813 16, FC (USD m) 1,099 1,208 1,204 (0.3) 9.6 Security Portfolio 1,837 1,803 2, Assets 29,562 28,633 31, Deposits 20,346 20,109 22, LC 11,336 11,541 12, FC (USD m) 3,088 2,855 2,302 (19.4) (25.4) Equity 2,104 2,221 2, Sources: Al Baraka Turk; TEB Investment/BNP Paribas estimates 10 BNP PARIBAS 23 JANUARY 2017

11 TSKB (TSKB (TSKB TI; BUY; CP: TRY1.35; TP: TRY1.70) Analyst: Duygun Kutucu, , TSKB will announce 4Q16 results on 27 January. We forecast TRY103m bank-only net profit for TSKB in 4Q16, corresponding to 12% q-q and 10% y-y contraction. While we do not foresee significant loan growth in FX adjusted terms, depreciation in TRY is expected to lead to 13% loan growth in nominal terms, the highest in our coverage. NII we forecast to come down 5% q-q on lower CPI linker income. We expect no specific provisioning cost, while general provisions must have increased due to high nominal loan growth. Exhibit 11: TSKB Income statement 4Q15 3Q16 4Q16E Change (TRY m) (TRY m) (TRY m) (q-q %) (y-y %) I. Net Interest Income (5.0) 10.5 II. Net Fee Income (31.8) III. Provisions Loan Loss Provisions ,058.1 Other IV. OPEX HR Non-HR V. Net Operating Income (I+II-III-IV) (19.5) (1.2) VI. Net Trading Gain/Loss 7 (24) (3) nm nm VII. Other Income VIII. Income From Participations nm nm IX. Pre-Tax Income (7.9) (7.8) X. Net Profit (12.1) (9.9) Recurring Net Profit (12.1) (10.0) Balance sheet Loans 13,675 15,352 17, LC 2,414 3,049 3, FC (USD m) 3,859 4,100 4,047 (1.3) 4.9 Security Portfolio 4,041 4,343 4, Assets 20,735 22,870 25, Deposits nm nm LC nm nm FC (USD m) nm nm Equity 2,489 2,870 2, Sources: TSKB; TEB Investment/BNP Paribas estimates 11 BNP PARIBAS 23 JANUARY 2017

12 Exhibit 12: 4Q16 earnings q-q growth comparison AKBNK GARAN HALKB ISCTR VAKBN YKBNK ALBRK TSKB (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) Income statement Net Interest Income (3.3) 3.8 (5.0) Net Fee Income Provisions 16.1 (16.1) (16.2) OPEX Net Operating Income (8.0) (13.2) (24.7) (33.2) (72.0) (19.5) Net Trading Gain/Loss 26.9 nm (38.4) nm 6.4 (60.2) 15.5 nm Other Income 1.7 (6.4) 14.8 (28.1) (24.1) Dividend Income nm (35.2) (100.0) nm nm (14.5) nm nm Pre-Tax Income (0.3) (14.0) (20.8) (27.3) 5.6 (7.9) Reported Net Profit (1.6) (18.0) (24.7) (30.0) (8.1) (12.1) Recurring Net Profit (9.1) (21.7) (31.7) 14.1 (23.8) (33.7) (9.2) (12.1) Balance Sheet Loans Deposits nm Equity Source: TEB Investment/BNP Paribas estimates Exhibit 13: 4Q16 earnings y-y growth comparison AKBNK GARAN HALKB ISCTR VAKBN YKBNK ALBRK TSKB (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) (TRY m) Income statement Net Interest Income (1.5) Net Fee Income (12.4) 0.8 (31.8) Provisions 11.7 (1.6) OPEX (9.4) 10.6 (2.1) (3.0) 19.7 Net Operating Income (14.9) 15.0 (0.1) 49.2 (5.0) (28.1) (90.8) (1.2) Net Trading Gain/Loss nm nm nm nm 3,869.4 nm 8.7 nm Other Income 42.4 (50.6) (17.1) (38.8) (42.2) (31.9) Dividend Income nm nm Pre-Tax Income (9.1) (42.8) (7.8) Reported Net Profit (6.2) (10.6) (49.2) (9.9) Recurring Net Profit (9.7) (20.1) (49.5) (10.0) Balance Sheet Loans Deposits nm Equity Source: TEB Investment/BNP Paribas estimates 12 BNP PARIBAS 23 JANUARY 2017

13 Non-banks Exhibit 14: Non-Bank 4Q16E comparison, sorted by y-y EBITDA growth Revenues EBITDA Net Profit Q15 3Q16 4Q16E Change Q15 3Q16 4Q16E Change Q15 3Q16 4Q16E Change KCHOL 18,216 17,309 19, na na na na na 1, (30) (4) SAHOL 8,064 8,385 8, na na na na na (18) (16) TKFEN 1, , (12) nm KRDMD (20) (98) nm (389) EREGL 2,999 2,702 3, (5) (5) TRKCM ASELS , ANACM (9) (14) (73) nm (17) ENKAI 3,004 2,552 2,803 (7) (14) (22) TOASO 2,968 3,112 4, (1) 22 TTRAK VESBE (4) SISE 2,026 2, TCELL 3,334 3, ,050 1,197 1, (52) 55 TTKOM 3,867 4,118 4, ,165 1,426 1, ,039 9 (1,085) nm nm DOAS 2,931 2,601 3, TUPRS 8,899 9,451 11, , , (36) (10) ULKER , (44) 14 BIMAS 4,536 5,056 5, (1) (2) CCOLA 1,273 2,245 1, (35) (73) (268) nm nm MGROS 2,378 3,079 2, (8) (25) 85 (4) (226) nm (5578) ARCLK 4,067 4,083 4, (16) AYGAZ 1,606 1,845 1, (1) (29) (12) FROTO 5,016 3,840 5, (6) (16) 38 BIZIM (8) (8) (11) (8) 12 CIMSA (12) (9) (13) (37) (18) (47) TAVHL 821 1, (14) (15) (51) (47) (73) VESTL 3,004 2,117 3, (16) (65) (44) AKCNS (5) (18) (22) (16) (41) TRGYO (18) 15 1, (22) 749 1, (62) 7423 THYAO 7,159 8,662 7,129 (0) (18) 621 1, (25) (70) , EKGYO 1,118 1, (65) (78) (36) (67) (45) (67) GUBRF (6) (82) (33) 7 (84) nm PGSUS 751 1, (38) (51) 399 (140) (174) nm (82) 243 (165) (102) nm Source: TEB Investment/BNP Paribas estimates 13 BNP PARIBAS 23 JANUARY 2017

14 Diversified financials Koc Holding (KCHOL TI; HOLD; CP: TRY14.31; TP: TRY13.7) Analyst: Alper Paksoy, , We foresee an 8% y-y rise in Koc Holding's consolidated top line, mainly on higher revenues in the energy segment. We forecast a 30% y-y decline at the bottom line on lower income contribution from the energy and finance segments Exhibit 15: Koc Holding Revenues 18,216 17,309 19, EBITDA na na na na na Net profit 1, (30) (4) Sources: Koc Holding; TEB Investment/BNP Paribas estimates Sabanci Holding (SAHOL TI; BUY; CP: TRY9.45; TP: TRY10.8) Analyst: Alper Paksoy, , alper.paksoy@tebyatirim.com.tr We expect 7% y-y consolidated top line growth at Sabanci Holding, thanks to higher banking revenues. The bottom line we expect to ease 18% y-y, however, on weaker bottom line contributions from retail and, due to one-time FX losses, from the electricity business. Exhibit 16: Sabanci Holding Revenues 8,064 8,385 8, EBITDA na na na na na Net Profit (18) (16) Sources: Sabanci Holding; TEB Investment/BNP Paribas estimates Emlak Konut GYO (EKGYO TI; BUY; CP: TRY3.03; TP: TRY3.85) Emlak Konut had a soft delivery schedule in 4Q16, with only two RSM projects (Maslak 1453 & Sarphan Finanspark) delivered during the quarter. Additionally we expect EKGYO to have sold TRY30m worth of residential units from its inventory in 4Q16. Accordingly, we forecast TRY396m in revenues in 4Q16 compared with TRY1.1b in 4Q15. Our EBITDA estimate of TRY305m indicates a y-y decline compared with TRY475m in 4Q15. We expect the EBITDA margin to increase to 77%, from 43% in 4Q15, due to the low cost of land in Sarphan Finanspark project. We expect the company to post TRY293m net income, down 45% y-y. Exhibit 17: Emlak Konut GYO Revenues 1,118 1, (65) (78) EBITDA (36) (67) Net Profit (45) (67) Sources: Emlak Konut GYO; TEB Investment/BNP Paribas estimates 14 BNP PARIBAS 23 JANUARY 2017

15 Torunlar Gayrimenkul Yatirim (TRGYO TI; BUY; CP: TRY4.25; TP: TRY5.60) We expect Torunlar to post TRY505m net income for 4Q16, thanks to a TRY800m expected revaluation gain on its real estate portfolio. Adjusted for that, we expect TRGYO to post a TRY294m net loss for 4Q16 due to FX translation losses that we estimate at TRY395m. Recall the company had USD626m and EUR195m financial loans in 3Q16 and TRY depreciated by 17.6% and 10% against USD and EUR during the quarter. Our revenue estimate of TRY246m indicates 18% y-y contraction, on the back of lower recognition of office and residential sales revenue at Torun Center project (estimated at TRY40m). We expect EBITDA to decrease by 22% y-y to TRY894m (adjusted EBITDA TRY94m). Exhibit 18: Torunlar Gayrimenkul Yatirim Revenues (18) 15 EBITDA 1, (22) 749 Net Profit 1, (62) 7423 Sources: Torunlar Gayrimenkul Yatirim; TEB Investment/BNP Paribas estimates Non-financials Energy Tupras (TUPRS TI; BUY; CP: TRY76.9; TP: TRY80.2) Analyst: Alper Paksoy, , alper.paksoy@tebyatirim.com.tr We expect Tupras's top line to rise 30% y-y due to the significant depreciation of TRY and higher oil prices y-y. We forecast EBITDA will be helped by the weaker TRY through both inventory gains and USD EBITDA being higher when translated into TRY. The Mediterranean complex refining margin was USD5.0/bbl in 4Q16 vs USD3.5/bbl in 3Q16, but we estimate Tupras saw only a limited benefit from this as most of the y-y rise in the regional indicative margin came from better cracks in fuel oil, of which Tupras produces less since the completion of the RUP investment. We forecast a decline at the bottom line on high financial expenses coming from significant depreciation of TRY against USD during 4Q16 and Tupras's nominal monetary short-fx position of about USD1b. Exhibit 19: Tupras Revenues 8,899 9,451 11, EBITDA 1, , Net Profit (36) (10) Sources: Tupras; TEB Investment/BNP Paribas estimates 15 BNP PARIBAS 23 JANUARY 2017

16 Materials Chemicals Gubretas (GUBRF TI; HOLD; CP: TRY4.85; TP: TRY6.80) We expect a 3% y-y increase in revenues to TRY624m on higher domestic sales volume despite a softer pricing environment. Ammonia and urea account for almost 75% of Razi's sales volume, and prices declined by 17% and 48% y-y in 4Q16, respectively. The weak pricing environment is putting additional pressure in margins. Hence we expect 81% y-y contraction in EBITDA to TRY23m in 4Q16, implying a 3.7% EBITDA margin. Gubretas is likely to record FX losses on its EUR68m debt as of 3Q16, due to TRY weakness. Exhibit 20: Gubretas Revenues EBITDA (81) 36 Net Profit 38 (33) 7 (83) nm Sources: Gubretas; TEB Investment/BNP Paribas estimates Metals & Mining Erdemir (EREGL TI; HOLD; CP: TRY5.52; TP: TRY5.41) Analyst: Alper Paksoy, , alper.paksoy@tebyatirim.com.tr Despite only a 1% y-y increase in unit sales, we foresee a 23% increase in revenues at Erdemir, due to higher flat steel prices y-y in USD and depreciation of TRY against USD y-y. Though lower q-q, EBITDA we forecast to more than double y-y in TRY, on higher steel prices vs flat unit costs USD. EBITDA per tonne is calculated at USD97/tonne, up nearly 100% y-y but down 33% q-q. We expect the bottom line to remain high in TRY terms on high EBITDA. Exhibit 21: Erdemir Revenues 2,999 2,702 3, EBITDA (5) Net Profit ,146 (5) Sources: Erdemir; TEB Investment/BNP Paribas estimates Kardemir (KRDMD TI; HOLD; CP: TRY1.19; TP: TRY1.15) Analyst: Alper Paksoy, , alper.paksoy@tebyatirim.com.tr We forecast a 40% increase in Kardemir's top line on 20% higher unit sales y-y, partly from deliveries postponed from 3Q, and higher long steel prices in TRY, because of depreciation of TRY against USD y-y. We estimate EBITDA will have nearly tripled y-y but off a very low base and also partly helped by inventory gains on higher long steel prices in TRY. We expect unit EBITDA at USD82/tonne vs USD39/tonne in 4Q15 and USD72/tonne in 3Q16. We expect a considerably negative bottom line as substantial depreciation of TRY against USD during 3Q16 drives up financial expenses, and the company has a cusd650m short-fx position in its balance sheet. 16 BNP PARIBAS 23 JANUARY 2017

17 Exhibit 22: Kardemir Glass Revenues EBITDA Net Profit 114 (20) (98) nm (389) Sources: The company ; TEB Investment/BNP Paribas estimates Anadolu Cam (ANACM TI; HOLD; CP: TRY3.06; TP: TRY2.50) We expect 12% y-y growth in revenues to TRY445m, based on our sales volume growth assumptions for both Turkey and Russia, together with price increases in Russia. The company managed to increase its sales prices by 18% in rouble terms. The company started to export to Northern Europe from Russia and diversified its product portfolio, which boosted margins. We forecast an EBITDA margin of 21.9% in 4Q16, implying a 620bp y-y improvement, with TRY98m EBITDA (+56% y-y). We expect the company to post TRY31m net income for 4Q16, in the absence of any one-off gains. Exhibit 23: Anadolu Cam Revenues (9) EBITDA (14) Net Profit (73) nm (17) Sources: Anadolu Cam; TEB Investment/BNP Paribas estimates Trakya Cam (TRKCM TI; BUY; CP: TRY2.92; TP: TRY3.15) We expect revenues to increase by 31% y-y to TRY820m, benefiting from the consolidation of Bulgaria operations that weren't in 4Q15 figures. We expect the Turkey operation to be positively affected by improving demand in construction and automotive sectors, together with easing competition from imports thanks to antidumping taxes on low-cost imports. A milder recovery in flat glass sales in Russia should also have contributed positively in 4Q16. We expect the EBITDA margin to post 610bp y-y improvement to 18.0% on opex savings, better sales composition towards high-margin products and a favourable cost base. Our net income estimate of TRY97m indicates a 71% y-y growth. Exhibit 24: Trakya Cam Revenues EBITDA Net Profit Sources: The company ; TEB Investment/BNP Paribas estimates Sisecam (SISE TI; HOLD; CP: TRY3.94; TP: TRY3.40) We expect 14% y-y revenue growth in 4Q16 to TRY2.3b, benefiting from positive contributions from flat glass, chemicals and glass packaging. We expect 24% y-y growth in EBITDA to TRY448m, higher than our revenue growth estimate, on better 17 BNP PARIBAS 23 JANUARY 2017

18 operational efficiency, implying a 170bp improvement in EBITDA margin to 17.7% in 4Q16. Our TRY179m net profit estimate indicates a 14% y-y increase. Exhibit 25: Sisecam Revenues 2,026 2,005 2, EBITDA Net Profit Sources: Sisecam; TEB Investment/BNP Paribas estimates Industrials Aerospace & Defence Aselsan (ASELS TI; HOLD; CP: TRY13.68; TP: TRY11.40) Kayahan Demirak, , kayahan.demirak@tebyatirim.com.tr We expect Aselsan to post 29% y-y top-line growth for 4Q16 on the back of strong backlog growth in the past two quarter We believe increasing cash generation from advances received in the quarter, on the back of accelerating backlog, will help topline growth as the company uses cash inflows from advance payments to fund various projects. We expect EBITDA to grow 93% y-y due to the low base; the company posted significantly higher marketing expenses for 4Q15. We expect the EBITDA margin to improve by 6ppt y-y on better opex control and a higher gross margin. Exhibit 26: Aselsan Revenues , EBITDA Net Profit Sources: Aselsan; TEB Investment/BNP Paribas estimates Industrial conglomerates Enka Insaat (ENKAI TI; BUY; CP: TRY5.78; TP: TRY6.50) We expect an 18% y-y contraction in consolidated revenues, mainly due to 13% and 26% estimated y-y declines in real estate and energy segment revenues. Our consolidated EBITDA estimate of USD178m indicates a 23% y-y increase, due to a recovery in the contracting segment's operating performance in 4Q16. We expect the contracting segment's EBITDA margin to increase to 13% in 4Q16 from 2.7% in 4Q15, when the company recorded a one-off loss. We forecast the real estate EBITDA margin is likely to stabilise at 70% (+7.2ppt y-y). We expect the consolidated EBITDA margin to improve by 6.9ppt to 20.9%. Our USD80m net profit estimate implies 24% y-y contraction, as we expect the company to post a USD45m financial expense on its bond portfolio. 18 BNP PARIBAS 23 JANUARY 2017

19 Exhibit 27: Enka Insaat (USD m) (USD m) (USD m) (y-y %) (q-q %) Revenues 1, (18) (1) EBITDA (3) Net Profit (24) (30) Sources: Enka Insaat; TEB Investment/BNP Paribas estimates Tekfen Holding (TKFEN TI; BUY; CP: TRY7.06; TP: TRY8.70) We expect a 20% y-y increase in consolidated revenue on the back of strong revenue generation (+38% y-y) in fertiliser due to a low base effect, while we expect a 7% increase in contracting revenues. Profitability of the contracting segment is likely to remain strong, with our estimated EBITDA margin 7.8% in 4Q16 as we don't expect a negative surprise from ongoing projects in the backlog. We expect a 8.5ppt y-y improvement in fertiliser margins to 14.9% due to a favourable cost/revenue structure and positive contributions from the completion of integration investment. As a result, our consolidated EBITDA estimate of TRY123m indicates a 9.9% EBITDA margin. Net income is likely to be negatively affected by a USD40m consolidated short position due to weakness in TRY. Exhibit 28: Tekfen Holding Revenues 1, , EBITDA Net Profit 32 (12) nm Sources: Tekfen Holding; TEB Investment/BNP Paribas estimates Machinery Turk Traktor (TTRAK TI; BUY; CP: TRY78.35; TP: TRY87.30) In 4Q16, Turk Traktor sold 8,768 tractors in the local market, up 21% y-y, and 3,165 tractors in export markets, down 15% y-y. We expect the company s net revenues to increase by 23% y-y on the back of higher domestic sales volumes and a weaker TRY affecting export revenues positively. We expect EBITDA to increase 30% as the company continued to raise unit prices. We expect the EBITDA margin to increase by 0.9 ppt y-y to 14.8% in 4Q16. Our net profit estimate of TRY80m implies a 1% y-y increase due to higher tax expense, as TTRAK benefited from deferred tax income in 4Q15. Exhibit 29: Turk Traktor Revenues EBITDA Net Profit Sources: Turk Traktor; TEB Investment/BNP Paribas estimates 19 BNP PARIBAS 23 JANUARY 2017

20 Transportation Turkish Airlines (THYAO TI; HOLD; CP: TRY5.15; TP: TRY5.40) Analyst: Alper Paksoy, , We estimate THY's revenues remained unchanged y-y in 4Q16 given the 3% decline in unit sales, as measured by revenue-passenger-kilometres (RPK), and weak yields, especially in USD terms. EBITDA we expect to drop 25% y-y on higher costs from the airline's 15% seat capacity expansion y-y not being offset by higher yields. We expect the bottom line to more than double, purely due to financial income from higher FX income (about TRY2.1b). Exhibit 30: Turkish Airlines Revenues 7,159 8,662 7,129 (0) (18) EBITDA 621 1, (25) (70) Net Profit , Sources: Turkish Airlines; TEB Investment/BNP Paribas estimates Pegasus Airlines (PGSUS TI; HOLD; CP: TRY15.07; TP: TRY13.1) Analyst: Alper Paksoy, , We expect 14% higher revenues y-y at Pegasus on 8% higher unit sales, as measured by revenue-passenger-kilometres (RPK). We expect EBITDA to go significantly further into the red on costs rising faster than yields with the significant depreciation of TRY and EUR against USD y-y. We expect the bottom line to go deeper into the red on lower EBITDA. Exhibit 31: Pegasus Airlines Revenues 751 1, (38) EBITDA (51) 399 (140) (174) nm Net Profit (82) 243 (165) (102) nm Sources: Pegasus Airlines; TEB Investment/BNP Paribas estimates TAV Airports (TAVHL TI; BUY; CP: TRY15.33; TP: TRY24.70) Analyst: Alper Paksoy, , Despite 1% growth (stake-adjusted) in the number of terminal passengers y-y, we expect TAV Airport's top line to ease 3% y-y in EUR terms due to lower duty free commissions and ground handling revenues y-y, as seen in recent quarters. We forecast EBITDA will decline 24% y-y in EUR terms on lower revenues and partly higher costs. We expect the bottom line to ease 53% y-y in EUR terms on lower EBITDA and higher D&A. Exhibit 32: TAV Airports (EUR m) (EUR m) (EUR m) (y-y %) (q-q %) Revenues (3) (20) EBITDA (24) (54) Net Profit (53) (75) Sources: TAV Airports; TEB Investment/BNP Paribas estimates 20 BNP PARIBAS 23 JANUARY 2017

21 Consumer discretionary Automobiles Dogus Otomotiv (DOAS TI; BUY; CP: TRY9.02; TP: TRY10.60) We expect a 36% y-y increase in revenues on the back of a 30% y-y increase in total sales volume in 4Q16, according to Automotive Distributors Association data, together with higher sales prices. We expect the EBITDA margin to contract for the quarter as we expect an increase in operating expenses due to increasing sales and marketing efforts and new model launches. Additionally, DOAS is likely to suffer from unfavourable pricing that squeezes its gross margin due to increasing competition. Our TRY109m EBITDA estimate implies a 2.7% EBITDA margin for 4Q16, down from 3.2% in 3Q16. Exhibit 33: Dogus Otomotiv Revenues 2,931 2,601 3, EBITDA Net profit Sources: Dogus Otomotiv; TEB Investment/BNP Paribas estimates Ford Otosan (FROTO TI; HOLD; CP: TRY32.3; TP: TRY33.8) We estimate a 6% y-y increase in revenues to TRY5.3b on a 1% y-y increase in domestic sales volume and higher export revenues benefiting from a weak TRY, despite an 11% y-y contraction in export volumes. We expect EBITDA to decrease by 6% for 4Q16 to TRY376m due to lower capacity utilisation and sales volumes. As a result, we expect a 90bp y-y contraction in EBITDA margin to 7.1%. Our net income estimate of TRY240m implies 16% y-y contraction. Exhibit 34: Ford Otosan Revenues 5,016 3,840 5, EBITDA (6) 20 Net Profit (16) 38 Sources: Ford Otosan; TEB Investment/BNP Paribas estimates 21 BNP PARIBAS 23 JANUARY 2017

22 Tofas Otomobil (TOASO TI; BUY; CP: TRY24.66; TP: TRY25.40) We expect a 67% y-y increase in revenues, mainly driven by strong export and domestic volumes during the quarter. Tofas' domestic sales volume grew 27% y-y in 4Q16, while export volume grew 78% y-y, thanks to higher PC sales in domestic and export markets. We expect 34% y-y EBITDA growth with 170bp contraction in EBITDA margin to 6.8% due to lack of take-or-pay usage, as the increase in physical exports are covering take-or-pay commitments. Net profit we forecast to decrease by 1% to TRY256m due to lower deferred tax income. Exhibit 35: Tofas Otomobil Revenues 2,968 3,112 4, EBITDA Net Profit (1) 22 Sources: Tofas Otomobil; TEB Investment/BNP Paribas estimates Household durables Arcelik (ARCLK TI; HOLD; CP: TRY21.74; TP: TRY18.90) White goods sales in Turkey were strong in the first two months of 4Q16, increasing by 9.5% y-y. Export shipments were also strong, with a 10.5% y-y increase in the same period. Hence, we forecast 11% y-y growth in revenues for 4Q16 for Arcelik to TRY4.5b. We expect a slight y-y contraction in margins due to increasing raw material prices, despite price increases in both domestic and export markets. As a result, we forecast a 9% y-y increase in EBITDA, which implies a 20bp decline in EBITDA margin to 10.9% in 4Q16. Our net profit estimate of TRY221m implies a 5% y-y increase. Exhibit 36: Arcelik Revenues 4,067 4,083 4, EBITDA Net Profit (16) Sources: Arcelik; TEB Investment/BNP Paribas estimates Vestel Beyaz Esya (VESBE TI; HOLD; CP: TRY12.55; TP: TRY10.25) We expect a strong quarter for VESBE in terms of sales and net income performance. We expect revenues to increase by 12% y-y to TRY813m, benefiting from strong export and domestic sales volumes. Additionally, VESBE increased the sales prices of some of its export products by 2-3% in 1H16. We expect profitability to normalise in 4Q16 in the absence of positive contributions from hedging contracts. Accordingly, our TRY116m EBITDA forecast implies a 14.3% EBITDA margin for 4Q16, down from 15.8% in 3Q16. We expect VESBE to post TRY80m net profit, +8% y-y, for 4Q BNP PARIBAS 23 JANUARY 2017

23 Exhibit 37: Vestel Beyaz Esya Revenues EBITDA Net Profit (11) Sources: Vestel Beyaz Esya ; TEB Investment/BNP Paribas estimates Vestel Elektronik (VESTL TI; BUY; CP: TRY6.48; TP: TRY8.00) We expect a recovery in domestic sales volume in 4Q16, following a contraction in 3Q16. Accordingly, our revenue estimate of TRY3.0b implies 1% y-y and 43% q-q increases. We expect margins to be under pressure due to increasing raw material prices and year-end sales campaigns that offer additional discounts in the domestic market. We expect EBITDA to decline 3% y-y to TRY202m in 4Q16, implying a 6.7% EBITDA margin (-20bp y-y). We expect the company to post a TRY99m net loss in 4Q16 due to its short FX position in the balance sheet. Exhibit 38: Vestel Elektronik Revenues 3,004 2,117 3, EBITDA (3) 36 Net Profit (99) nm nm Sources: Vestel Elektronik ; TEB Investment/BNP Paribas estimates Consumer staples Bim Birlesik Magazalar (BIMAS TI; HOLD; CP: TRY53.1; TP: TRY52.5) Kayahan Demirak, , kayahan.demirak@tebyatirim.com.tr We expect BIM S traffic LfL contraction to continue, but at slower pace compared with 9M16 in 4Q16, due to weak consumer sentiment and continuation of internal and external cannibalisation resulting from accelerating store openings in the discounter universe by the three major players in 4Q16. We expect q-q improvement in LfL basket size on a pick-up processed food inflation. In the international operations, Egypt should post a decline in both sales and margins as a result of sharp depreciation of the Egyptian pound in November. Accordingly, We estimate 15% growth in revenues, mainly driven by store expansion in Turkey operations (avg +12% y-y in 4Q16). We expect the EBITDA margin to remain flat, despite opex rising significantly y-y and expected LfL traffic contraction, driven by a significant y-y improvement in gross margin in 3Q16 that we believe will partly pass on to 4Q16 numbers. Exhibit 39: Bim Birlesik Magazalar 4Q15 3Q16 4Q16E Change Revenues 4,536 5,056 5, EBITDA Net Profit (2) Sources: Bim Birlesik Magazalar; TEB Investment/BNP Paribas estimates 23 BNP PARIBAS 23 JANUARY 2017

24 Bizim Toptan (BIZIM TI; BUY; CP: TRY11.81; TP: TRY16.80) Kayahan Demirak, , We expect BIZM S LfL sales growth to slow significantly to +1.5% y-y, compared with 12% growth in 9M16, due to a weakening wholesale customer segment in 4Q16. Sharp depreciation and increasing volatility in the Turkish lira throughout 4Q16 had a severe negative impact on the wholesale customer segment as it reduced the predictability of the business environment. We expect flat LfL sales to take its toll on operating margins, with a higher percentage of opex weighing on sales. Exhibit 40: Bizim Toptan Revenues (7.6) EBITDA (7.6) (11.3) Net Profit (7.6) 12.4 Sources: Bizim Toptan; TEB Investment/BNP Paribas estimates Migros Ticaret (MGROS TI; BUY; CP: TRY18.23; TP: TRY22.00) Kayahan Demirak, , kayahan.demirak@tebyatirim.com.tr We expect Migros s domestic operations to continue to post strong growth numbers on the back of high customer traffic. We also expect international operations to pick up slightly, primarily due to a low base impact and weak TRY. Consequently, we foresee a 19% y-y increase in sales in 4Q16. On the profitability front, we expect the gross margin to contract significantly in 4Q16 (-0.7ppt y-y) on a high base impact and price investments made throughout the quarter. On the other hand, we expect strong LfL sales to partly compensate for the impact on operating profit from a lower gross margin. High EUR debt, non-cash FX losses (9.4% q-q devaluation of TRY against EUR) and increasing interest payments should bring 4Q16 to a net loss of TRY226m. Exhibit 41: Migros Ticaret Revenues 2,378 3,079 2, (8) EBITDA (25) Net Profit 85 (4) (226) nm (5578) Sources: Migros Ticaret; TEB Investment/BNP Paribas estimates Food & Beverages Coca-Cola Icecek (CCOLA TI; HOLD; CP: TRY37.66; TP: TRY36.70) Kayahan Demirak, , kayahan.demirak@tebyatirim.com.tr We expect CCOLA to post 13.5% revenue growth on relatively high volume growth in international operations at 8.7% in 4Q16, thanks to a pick-up in Kazakhstan operations and continuation of strong volume growth in Pakistan. In addition, a weaker TRY y-y performance against the currencies of CCI s major international operations should increase the contributions of international operations in TRY terms. On the margin front, we expect CCOLA s Turkey EBITDA margin to contract slightly on a 5.9% y-y contraction in the most profitable sparkling category and weak TRY weighing on input costs, while the margin in international operations should pick up slightly thanks to improving y-y profitability in both Pakistan and Kazakhstan operations. We expect net profit growth to turn negative y-y, mainly on heavy noncash FX loses resulting from a 12.2% q-q devaluation of TRY against EUR-USD.. 24 BNP PARIBAS 23 JANUARY 2017