Dogtas Kelebek. OUTPERFORM Current price: TRY mo T.Price: TRY5.55. Furnishing your investments

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1 Turkish Equities / Furniture / Initiation of Coverage Dogtas Kelebek Furnishing your investments We are initiating coverage of Dogtas Kelebek with an Outperform rating and a DCF derived 12M target price of TRY5.55/sh., which implies 33% upside potential. We like the company as it offers robust top line generation (26% CAGR forecasted between 2017F and 2022F) on the back of double digit L f L growth with positive traffic and ongoing rapid store expansion plan. Despite its strong performance (+146% YtD), the stock is trading at 7.6x 2018 EV/EBITDA multiple, which we find attractive given expectations of robust top line growth, going forward. The furniture market will grow faster in the organized sector. Total size of the Turkish furniture market is estimated at TRY22bn in 2017, with 9% CAGR between F. The organized (branded) furniture retail sector accounts for ~30% of the total market. Going forward, given consumer preferences and rapid store openings of organized furniture retailers, organized furniture (branded) market is expected to grow by 15% per annum, while unorganized furniture (non branded) is projected to grow by 5% per annum by 2025 according to a study conducted by an independent consultant firm. With this projection, the organized share in the total furniture retail market is expected to reach half of the market (up from ~30%) by 2025; thus still offering massive growth potential. Restructuring has started to bear fruit, leading to strong growth prospects for 2017 & Dogtas Kelebek started to reap the benefits of restructuring of its business model and optimization of the sales channel starting from mid 2016 (targeting total savings of ~TRY28mn for 2017). Accordingly, we foresee a 49% YoY top line growth (to TRY589mn), and four fold YoY EBITDA growth (to TRY103mn) in 2017, thanks to price hikes, strong L f L sales growth and traffic growth at existing stores, together with increasing store network through new store openings. Rapid store expansion foreseen going forward. The management plans to open ~50 stores (net) every year (including international) during 2017 and 2019 (on top of its 343 stores in 2016, including international). We foresee the company to open average 43 new stores (net) per annum during our ten year forecast horizon, thanks to massive growth potential of the organized (branded) furniture retail sector that only accounts for ~30% of the total market. Based on our assumptions, Dogtas Kelebek could double its total store network by OUTPERFORM Current price: TRY mo T.Price: TRY5.55 Analyst Bertug Tuzun +90 (212) bertug.tuzun@akyatirim.com.tr Stock Data* Ticker (Reuters, Bloomberg) DGKLB IS, DGKLB TI Market Cap. (TRYmn) 870 Number of Shares (000) 209,069 Free Float 7.9% Daily Avg. Vol. (3 Mo., TRYmn) 5.6 Net Debt (2017/06, TRYmn) 246 BIST 100 Index (TRY ) 104,123 * Stock data is as of 22 September DGKLB - Price & Index Relative Performance Sep-16 Dec-16 Feb-17 Apr-17 Jul-17 Sep-17 Index Relative (LHS) Stock Performance 1W 1M 3M 1Y TL 2.5% 12.4% 1.0% 222.5% Index Rel.* 6.0% 17.1% 3.1% 140.3% * vs. BIST Total Return Index Share Data (RHS) Forecasts (TRYmn) F 2018F Net Sales EBITDA EBITDA mgn. 8.8% 6.2% 17.5% 17.0% Net Profit EV/Sales EV/EBITDA P/E Shareholding Structure Dogan Family 46.05% International Furniture B.V % Free Float 7.89% Please see penultimate page for additional important disclosures. Ak Yatirim Menkul Degerler A.S. ( AK INVESTMENT ) is a foreign broker dealer unregistered in the USA. AK INVESTMENT research is prepared by research analysts who are not registered in the USA. AK INVESTMENT research is distributed in the USA pursuant to Rule 15a 6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA member broker dealer.

2 INVESTMENT THEME We are initiating coverage of Dogtas Kelebek with an Outperform rating and a DCF derived 12M target price of TRY5.55/sh., which implies 33% upside potential. Dogtas Kelebek is Turkey s second largest manufacturer of furniture and bedding. We like the company as it offers robust top line generation (26% CAGR forecasted between 2017F and 2022F) on the back of double digit L f L growth with positive traffic and ongoing rapid store expansion plan. The company is already delivering on this investment theme in 2017, that is supported by a better macro environment along with improving consumer sentiment supported by a VAT cut from 18% to 8% and favorable competitive environment; we expect the company to post a growth of 49% YoY in its top line and four fold YoY growth in EBITDA in Going forward, Dogtas Kelebek is expected to benefit from faster growth of organized (branded) furniture sector by using its scale advantage on procurement and expanding its store network. Moreover, we also see a deleveraging story in play for Dogtas Kelebek; on our assumptions, the company s net debt/ebitda could fall to 2.2x level at end 2017 from 4.6x as of end 1H17 (12M trailing), which may be welcomed by the market. Despite its strong performance (+146% YtD), the stock is trading at 7.6x 2018 EV/EBITDA multiple, which seems attractive given its solid top line growth projection. Dogtas Kelebek is the second largest player in the Turkish furniture sector Dogtas Kelebek is the Turkey s leading manufacturer of furniture and bedding. The company s product range includes living room, dining room, bedroom, and kitchen (93% of revenues as of end 1H17), while it also produces and sells bedding products (7% of total revenues as of end 1H17). The company has a total capacity of 4.2mn sqm/per year panel production, 300k sqm/per year kitchen furniture production, 141k units/per year upholstery production and 75,600 units/per year bed production. The company targets mid high income consumer segment with its two main strong brand names Dogtas and Kelebek. Dogtas Kelebek sells its products through a sales channel consisting of total 303 stores; domestically (40 owned stores franchise stores) and internationally (51 franchise stores) as of the end of June The company recorded consolidated revenues of TRY395mn and EBITDA of TRY25mn in According to the Brand Finance (2016), Dogtas Kelebek is the most valuable furniture brand in Turkey. The furniture market will grow faster in the organized sector Total size of the Turkish furniture market is estimated at TRY22bn in 2017, with 9% CAGR between F. The organized (branded) furniture retail sector accounts for ~30% of the total market. Turkey s favourable demographics marked by high population growth, large young population, marriages around 600,000 every year and divorces around 130,000 each year creating new households, rising per capita income, brisk housing activity, and lifestyle changes promoting single households, support the Turkish furniture sector. Meanwhile, trends are now pointing to a shorter replacement cycle for furniture (every 5 7 years, compared to every 10 years in the past), on the back of rising consumer income. 2

3 Given consumer preferences and rapid store openings of organized furniture retailers, organized furniture (branded) market is expected to grow by 15% per annum, while unorganized furniture (non branded) is projected to grow by 5% per annum by 2025 according to a study conducted by an independent consultant firm. Moreover, consumers are now looking not only for quality, but also for warranties and trustworthiness of brands. In fact, furniture purchase is perceived as a big ticket cost item for Turkish households given a set of furniture (i.e. bedroom set) has an average price tag of of ~TRY5,000. With this projection, the organized share in the total furniture retail market is expected to reach half of the market (up from ~30%) by 2025; thus still offering massive growth potential. Favourable competitive environment There are approximately more than 30k individual companies operating in the Turkish furniture sector. The leading players alongside Dogtas Kelebek are Istikbal Group (Istikbal, Bellona and Mondi brands) and Yatas Group (Yatas Bedding and Enza Home brands). Istikbal Group, the market leader, is running with combined c.2,000 stores in Turkey, while the third player Yatas Group is operating with 284 stores. Both Dogtas Kelebek and Yatas (Enza Home brand) positioned themselves more at the upper income segment, while Istikbal Group targets mid income segment. Note that Istikbal Group lost some ground starting late 2016 after being seized by the SDIF (Savings and Deposit Insurance Fund), which provided a relief in terms of competitive pressures for Dogtas Kelebek and Yatas Group. Restructuring has started to bear fruit With a new management team, Dogtas Kelebek entered a restructuring process in mid 2016, targeting total savings of ~TRY28mn for Accordingly, the management negotiated with its suppliers for better procurement terms (projecting ~TRY20mn savings). Moreover, some cost cutting measures were implemented in production facilities (both in Biga and Duzce) for planning total savings of TRY4 4.5mn. Finally, closure of loss making stores and reshuffling of store locations from shopping malls to main streets will also bring of TRY0.30mn/month savings in rental expenses, with a total savings forecast of TRY3.6mn in The restructuring plan was fully executed at the beginning of Indeed, Dogtas Kelebek succeeded in expanding profitability with EBITDA margin rising to 17.3% in 1H17 from 8.0% in 1H16. leading to strong growth prospects for 2017 & 2018 Dogtas Kelebek started to reap the benefits of restructuring of its business model and optimization of the sales channel starting from mid Accordingly, we foresee a 49% YoY top line growth (to TRY589mn), and four fold YoY EBITDA growth (to TRY103mn) in 2017, thanks to price hikes, strong L f L sales growth and traffic growth at existing stores, together with increasing store network through new store openings. The management also plans to make the third price increase in 2017 at an average of c.6% at the beginning of November, bringing the cumulative price hikes to c.20% in This would support both top line growth and margins not only for 2017 but also for Moreover, despite the absence of lower VAT rate, we forecast TRY810mn in revenues (+38% YoY growth) 3

4 and TRY138mn (+33% YoY) in EBITDA with the positive impact of store openings during 2017 to be mostly reflected on revenues in Dogtas Kelebek s selected P&L items 20% 18% 16% 14% 12% 10% 17.3% 17.5% % 810 1, % 1,200 1, % 6% 4% 2% % % % 1H16 1H F 2018F 2019F Revenues EBITDA Marg. 0 Source: The company, Ak Investment Estimates Rapid store expansion foreseen going forward The management plans to open ~50 stores (net) every year (including international) during 2017 and 2019 (on top of its 343 stores in 2016, including international). We foresee the company to open average 43 new stores (net) per annum during our tenyear forecast horizon, thanks to massive growth potential of the organized (branded) furniture retail sector that only accounts for ~30% of the total market. Based on our assumptions, Dogtas Kelebek could double its total store network by Dogtas Kelebek s store network forecasts F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Source: Ak Investment Estimates # of existing stores # of new stores (net) 4

5 A comparison between Dogtas Kelebek and Yatas Group Yatas Group is also a listed company in the BIST. Based on the latest results (1H17), Dogtas Kelebek s top line grew by 36% YoY to TRY251mn (achieved a 30% L f L sales growth), while Yatas top line increased by 56% YoY to TRY346mn (posted a 31% L f L sales growth). Better macro environment along with improving consumer sentiment supported by a VAT reduction from 18% to 8% and favourable competitive environment, supported strong top line growth in both companies. On the profitability side, Dogtas Kelebek s EBITDA margin improved by 9.3 ppts YoY to 17.3% in 1H17, while Yatas EBITDA margin rose by 3.9 ppts YoY to 12.1% in 1H17. Dogtas Kelebek vs. Yatas selected P&L items (1H17) Dogtas Kelebek Yatas (TRYmn) 1H17 1H16 1H17 1H16 Revenues EBITDA EBITDA Margin 17.3% 8.0% 12.1% 8.2% Net Income Net Debt Source: Ak Investment Both Dogtas Kelebek and Yatas shares have performed well in 2017, as Dogtas Kelebek shares rose by 146% YtD, while Yatas shares increased by 252% YtD with the strong performance of the Turkish furniture market. Relative chart (Dogtas Kelebek vs. Yatas) /2/2017 2/2/2017 3/2/2017 4/2/2017 5/2/2017 6/2/2017 7/2/2017 8/2/2017 9/2/2017 DGKLB YATAS/DGKLB YATAS 0 Source: Ak Investment 5

6 RISKS The main risks to our valuation and rating include; i) any negative sentiment in macroeconomic conditions that would depress demand for furniture, ii) delays or obstacles in execution of growth plans of the company (i.e. rapid store expansion plan), iii) FX rate volatility (especially any depreciation of the TRY against the EUR) given that the company carried TRY137mn (TRY equivalent) net short FX position (25.3% of total assets) at the end of 2Q17, v) rising competition in the market from existing players and/or from new entrants, vi) higher than expected increase in raw material prices (i.e. wood product prices). 6

7 VALUATION DCF valuation Our DCF valuation is based on a forecast horizon between 2017F 2027F. Assuming a TRY cost of equity (CoE) of 16.4% on a re levered beta of 1.16, a cost of debt of 17.5%, a tax rate of 20% and an average 20% debt equity ratio during the forecast horizon, we reach a 16.0% average WACC for our analysis. The terminal growth rate is taken as 7.0%. We assume that the RONIC will be equal to the WACC in the terminal period; hence the growth has a neutral impact on value as the average of all future investments is conservatively assumed to have a zero NPV. Our key DCF assumptions: We present our forecasts in the table below. In brief; We look for a 26% CAGR in the top line for 2017F 22F period. We believe the rapid revenue growth seen in 2017 will also be achieved in the next three years. The robust top line growth is expected to be driven by (increasing number of store network through new store openings (average 43 net new store openings per annum assumption during our ten year forecast horizon), and strong l f l sales growth (both basket size and traffic growth). REVENUE FORECASTS 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Revenues ,082 1,345 1,591 1,872 2,193 2,560 2,979 3,456 3,998 Revenue Growth 49% 38% 34% 24% 18% 18% 17% 17% 16% 16% 16% New store openings (net) # of total stores Source: Ak Investment Estimates Dogtas Kelebek s gross margin averaged at 33.6% in the period. The company posted a 38.8% gross margin in 1H17, thanks to negotiations with suppliers for better terms in procurement and some cost cutting measures that were implemented at production facilities (in Biga and Duzce). For 2017, we expect a gross profit margin of 39.5% note that 2Q and 3Q are the best quarters in terms of sales for Dogtas Kelebek. Going forward, we assumed that the gross margin would remain at 39.5% level. In , Dogtas Kelebek s average operating expenses (op ex) over revenues ratio stood at 27.5%. Marketing & distribution expenses had the lion s share in op ex, accounting for 79% (last five years average) of the total. Accordingly, we assume an average op ex over revenues ratio of 24.7% between 2017F 27F, on the back of the prevailing operating leverage and strict op ex control. All in all, we forecast an average EBITDA margin of 16.5% during 2017F 2027F period. 7

8 During 1H17, Dogtas Kelebek s net working capital over trailing revenues stood at 28.3%. We have reflected some improvement in net working capital with a decrease in receivables, thanks to advanced received payments from its franchises and increase in third party production from ~30% in 2017 to ~50% in Accordingly, we have assumed average net working capital over revenues ratio of 22% for our forecast period. For 2017, Dogtas Kelebek s cap ex requirement is estimated at TRY22mn (3.7% of revenues) compared to 1H17 cap ex spending of TRY11.8mn. The breakdown of 2017 capex is TRY12mn for machinery and building investments at the production plants to increase capacity in line with their robust growth plan and TRY10mn for financing of new store openings. The 2018 cap ex amount is forecasted to be slightly higher at TRY24mn (3% of revenues) with TRY14mn for capacity upgrade and remaining TRY10mn for store openings. Going forward, we forecast an average cap ex/revenues ratio of 3% in 2019F 27F, compared to the 4% average over the last four years ( period). Discounted Cash Flow (TRYmn) 2H17F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F EBIT ( ) taxation (4) (24) (32) (40) (47) (56) (65) (76) (88) (103) (119) NOPAT (+) depreciation ( ) WCR (16) (48) (59) (58) (54) (61) (70) (80) (92) (104) (119) ( ) Cap Ex (11) (24) (32) (40) (48) (56) (66) (77) (89) (104) (120) FCFF Discount Factor PV of FCF PV of FCF (17F 27F) 563 Terminal 7% growth 3,157 PV of TV 684 Net Debt (end 1H17) 246 Firm Value 1,002 12M Firm Value 1,161 # of shares (million) 209 Target Share Price 5.55 Current Share Price 4.16 Upside/Downside 33% Source: Ak Investment Estimates 8

9 COMPANY OVERVIEW History Dogtas was founded by the Dogan family in 1972 and it acquired listed Kelebek furniture in In 2013, the two entities were merged under the name of Dogtas Kelebek so that Dogtas became listed with this merger. Dogtas Kelebek sells its products through a sales channel consisting of total 303 stores; domestically (40 owned stores franchise stores) and internationally (51 franchise stores) as of the end of June Dogtas Kelebek is a leading manufacturer of furniture (i.e. living room, dining room, bedroom, and kitchen) and bedding with consolidated revenues of TRY395mn and EBITDA of TRY25mn in The company had a total of 1,451 employees as of end June Shareholder Structure 7.89% 46.05% 46.05% Dogan Family International Furniture B.V. Free Float Source: The company Shareholder Structure Dogtas Kelebek s main shareholders are Dogan family members and Turkven (through its SPV International Furniture B.V.), a Turkish based leading private equity firm with AUM of US$2bn, with an equal share of 46.05%, while the remaining 7.89% is free float. Both Turkven and Dogan family members are equally represented at Dogtas Kelebek s 6 member BoD, each having 2 seats and the remaining 2 board members are independent (each of them appointed by the two main shareholders). 9

10 Production Facilities The main production facilities of Dogtas Kelebek are located in Biga Canakkale (~340km west of Istanbul) and Duzce (~230km east of Istanbul). The production plants are strategically located in the Marmara region to provide proximity to customers to keep transportation costs under control. In fact, the proximity to big markets (Istanbul, Ankara and Izmir), leads to efficient logistics and distribution capability for Dogtas Kelebek. The plants are currently running at ~70% CUR (as of end 1H17) and the company is increasing total production capacity gradually by adding further lines in 2017 (already added 10k sqm closed area at the Duzce plant for TRY7.5mn in mid August) and in Production Capacities Biga Plant Duzce Plant Panel Furniture 2.4mn sqm/per year 1.8mn sqm/per year Kitchen Furniture 300k sqm/per year Upholstery Production 93,120/units/per year 48,159 units/per year Bed Production 75,600 units/per year Source: The company Biga Plant Duzce Plant Source: The Company Meanwhile, Dogtas Kelebek currently outsources 30% of its total production to subcontractors. However, the management is planning to increase the outsourcing to 50% in 2018 for keeping up with the strong demand without having to make costly capex investment for 2018 and

11 Turkey Operations In 2016, domestic operations accounted for 88.2% of total Dogtas Kelebek s revenues. Dogtas Kelebek carries out its domestic sales under two brands Dogtas and Kelebek. Dogtas is Turkey s leading furniture manufacturer (i.e. living room, dining room, bedroom) with its stylish, functional, rich product range. Kelebek is Turkey s first panel furniture and kitchen producer. Kelebek produces furniture, kitchens, bathrooms, living room sets, customized wooden furniture at its Duzce plant. The stores are mostly located on main streets (only 3 stores are in shopping malls that are all located in Istanbul) to increase the visibility of brands in the eyes of consumers. Dogtas brand stores have average 1,500 sqm of retail space whereas, Kelebek stores have average retail space of 1,000sqm. All stores (including self owned stores) are leased and average contract period is ~5 years. The rental contacts are in TRY terms (shopping malls are in term) and escalated based on average CPI every year. Dogtas Store Kelebek Store Source: The company Under the restructuring plan, Dogtas Kelebek has invested in enhancing its product portfolio (functionality and design) in order to appeal to the tastes of mid to high income level consumers through its well known Dogtas and Kelebek brands. Together with the sector s strong fundamentals, the VAT cut from 18% to 8% (implemented in February and valid until end September 2017) on furniture and bedding supported the top line performance during Hence, Dogtas Kelebek top line grew by 36% YoY in 1H17 (achieved a 30% L f L sales growth). Furniture sales comprised the highest share in revenues (average of 80% of total revenues) followed by sales of beds and kitchen furniture (each average of 10% of total revenues). Meanwhile, Dogtas Kelebek plans to launch new bedding brands in 4Q17. The company has partially smoothed out the seasonality effect (furniture sales peak in Q2 and Q3) by increasing sales to residential real estate developers (i.e. kitchens, closets, and doors of new residences) as well as public institutions during the low season (Q1 and Q4). This enables production facilities to keep running, thus supporting the overall CUR, resulting in lower unit costs. Note that the company targets to generate revenues of ~TRY70mn in 2017 and ~TRY100mn in 2018 from these sales accounting for ~12% of total consolidated revenues on an annual basis, respectively. 11

12 The company plans to open 20 self owned and 65 franchise stores in the domestic market in 2017 (it already opened net 9 self owned and 20 franchise stores in 1H17). Note that most of the store openings are scheduled to take place in 2H17. Domestic Stores (by segment) /3 2017/6 Self Owned Stores Dogtas Kelebek Kelebek Mutfak 2 Franchised Stores Dogtas Kelebek Kelebek Mutfak Total Source: The company Going forward, Dogtas Kelebek plans to grow through self owned stores in big cities like Istanbul, Ankara and Izmir. In smaller regions, the company plans to grow its retail network through the franchise system. It is worth noting that self owned stores offer higher margins (as the dealer margin belongs to the company), but it also requires more investment in store decoration, higher op ex and financing of working capital. Therefore, the franchise system is beneficial for the company in cost terms (op ex and capex requirements), while it enjoys from the higher growth potential. On average, opening Dogtas and Kelebek brand store costs around TRY1.5 2mn (including inventory). The payback period of self owned stores averages around years. International Operations International operations corresponded to 11.8% of Dogtas Kelebek s total revenues in Dogtas Kelebek sells its products through its franchise system in international markets. The company exports to 32 countries with 54 sales points comprised of 49 franchise stores & 5 corner shops abroad in The main export destinations were Iraq, the UK, Saudi Arabia, Azerbaijan and Germany in Export revenues rose by 27% YoY to TRY46.6mn in 2016, with a share of 11.8% in total revenues up from 9.8% in The company is aiming to more than double export revenues to ~TRY120mn by end 2019 with more store openings through offering franchises across a wide geography. During , international operations are expected to grow by a CAGR of 34% to TRY235mn, according to our estimates and the share of exports in total revenues is expected to remain at ~12% in the coming years. Note that Dogtas Kelebek is a member of Turquality incentive program since 2008 and receives government support (i.e. contributions for rent and advertising expenses) for its international operations. Moreover, the company uses its trade company located in Germany to reach consumers in target countries, especially in Europe. 12

13 DGKLB Financial Statements & Key Ratios Income Statement (TRYmn) F 2018F 2019F Net sales ,082 Cost of goods sold Gross profit Operating expenses EBIT Net other income & expense from operations Net profit (loss) from subsidiaries Net financial income & expense Profit before taxes Taxation on continuing operations Non controlling interest ( ) Net profit Depreciation EBITDA Nominal Changes (YoY) F 2018F 2019F Net sales 16% 6% 49% 38% 34% Gross profit 13% 4% 79% 38% 34% EBIT 44% 56% 887% 38% 34% EBITDA 37% 24% 318% 33% 31% Net profit 146% 43% 159% 198% 44% Profit Margins F 2018F 2019F Gross profit margin 33.6% 32.9% 39.5% 39.5% 39.5% EBIT margin 5.4% 2.2% 14.8% 14.8% 14.8% EBITDA margin 8.8% 6.2% 17.5% 17.0% 16.6% Net margin 7.4% 10.0% 3.9% 8.5% 9.2% Key Metrics F 2018F 2019F Receivable days Inventory days Payable days Working capital days Capex/sales 4.7% 3.5% 3.7% 3.0% 3.0% Net debt (TRYmn) Net debt / Equity Net debt / EBITDA ROA (%) 7.6% 9.3% 4.9% 12.3% 14.4% ROIC (%) 6.7% 2.9% 24.6% 28.2% 32.3% ROE (%) 77.5% 153.0% 26.6% 35.8% 33.0% Dividend payout (%) 0.0% 0.0% 0.0% 0.0% 0.0% Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% Effective tax rate (%) 19.6% 5.8% 5.8% 10.0% 20.0% Valuation F 2018F 2019F EV/Sales EV/EBITDA P/E FCF yield (%) 53.1% 44.5% 1.4% 10.9% 12.3%

14 Cash Flow Statement (TRYmn) F 2018F 2019F Profit before tax Depreciation Changes in WC Operating Cash Flow Capex Free cash flow Change in financial debt Dividends paid Cash from financial operations Other Change in cash & equivalents Cash beginning of period Cash end of period Balance Sheet (TRYmn) F 2018F 2019F Current Assets Cash & equivalents Marketable securities Short term trade receivables Other short term receivables Inventory Other current assets L/T Assets Long term trade receivables Other long term receivables Long term financial assets Tangible fixed assets Intangible fixed assets Other long term assets TOTAL ASSETS S/T Liabilities Short term financial loans Short term trade payables Other short term payables Other short term liabilities L/T Liabilities Long term financial loans Long term trade payables Other long term payables Other long term Liabilities EQUITY Shareholders capital Non controlling interests TOTAL LIABILITIES & SH. EQUITY

15 Disclaimer This research report is for distribution only under such circumstances as may be permitted by applicable laws. The information and opinions in this report were prepared by AK INVESTMENT (Ak Yatırım Menkul Değerler A.Ş.) with information and data obtained from public sources, which are believed to be trustworthy. However, this research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to herein and, AK INVESTMENT does not guarantee that the information contained herein is true, accurate, complete or unchangeable. The views of AK INVESTMENT reflected in this document may change without notice. Investment information, recommendations and opinions contained in this report are not under the scope of investment advisory services. Investment advisory services are provided by authorized investment institutions to persons and entities privately by considering their risk and return preferences in accordance with the investment advisory services framework agreement to be executed by and between authorized investment institutions and clients, whereas the comments and advices included herein are of general nature. The statements indicated in this report should not be construed as an offer, invitation or solicitation to sell or purchase any securities or other instruments under any circumstances. This research report and any investment information, opinion and recommendation contained herein have not been prepared based on and may not fit to specific investment objectives, financial situation, investment goals, risk return preferences or particular needs of any specific recipient, and investments discussed or recommended in this report may involve significant risks, may be illiquid and may not be suitable for all investors. Therefore making an investment decision only by relying on the information given herein may not give results that fit your expectations. Investors must make their own investment decisions considering the said circumstances and based on their specific investment objectives and financial situation and obtaining independent specialized advice as may be necessary. In addition, AK INVESTMENT research department produces various types of research including, but not limited to, fundamental analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research, whether as a result of differing time horizons, methodologies, or otherwise. AK INVESTMENT is under no obligation to disclose or take account of this document when advising or dealing with or on behalf of customers. Readers are thus advised to have the accuracy of the information contained confirmed before acting by relying on such information and the readers shall bear the responsibility of the decisions taken by relying thereon. Neither AK INVESTMENT nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or any losses or damages which may arise from the use of this research report. Furthermore, the personnel and consultants of AK INVESTMENT shall not have any responsibility in any case for direct or indirect damage caused by such information. Moreover, AK INVESTMENT shall not be held liable for any damage to the hardware or software of the receiver caused by any viruses, detected transfer or any other technical reason in case of the receipt of the reports via the internet or through . Ak Investment Research Stock Rating Methodology Our rating system aims to indicate a relative value and is therefore based on a graduated scale (Outperform, Neutral and Underperform). While the BIST-100 (XU100) Index is treated as the point of reference when assigning our ratings, each analyst also takes into account views towards stocks in relation to the sectors under coverage and the sector call relative to the market. We also categorize the stocks in our coverage under two groups, principally in accordance with their liquidity (based on free-float market capitalization and historical average daily trading volume) as small-cap stocks exhibit different risk/return characteristics than more-liquid large-caps. In conjunction, the individual stock ratings reflect the expected return of the stock relative to the broader market over the next 6 to 12 months. The expected performance equals to the sum of forecasted share price appreciation and expected cash dividend income. It is a function of the near-term company fundamentals, the outlook for the sector, the confidence in earnings projections and the company valuation, along with other factors. In light of this expected return, the target price for a stock represents the value the analyst expects the stock to reach or sustain over a 12-month horizon. However, this

16 should be interpreted as a notional reference price and must be discounted by the stock s cost of equity to calculate the current fair price estimate. A key element of our rating system is the benchmarking of the 12-month expected return against the cost of equity. We apply a required rate of return for each stock, calculated on the basis of our assumed risk-free rate and equity risk premium. A stock is normally assigned an Outperform rating if the implied return over the next 12 months exceeds the required rate of return (cost of equity) by at least 10 percentage points for our larger-cap stock coverage, or by 15 percentage points for the small-cap group. As the average potential upside of the stocks in our coverage may be considerably higher or lower than the average cost of equity, we also filter stocks according to their potential upside with respect to other stocks under coverage, with the practical aim of attaching an Outperform rating to the top group (generally 30-50% of the companies under our coverage), a Neutral rating for the next 40-50% and an Underperform rating to the lowest group (no less than 10%, and typically between 10-20% of the coverage group). The expected returns on some stocks may fall outside the range of the applicable rating category, due to movements in market prices and other short-term volatility or trading patterns, or analyst discretion. While temporary deviations from the specified ranges are permitted, they would subsequently become subject to review. Note too that the analyst s shortterm view may occasionally diverge from the stock s longer-term fundamental rating. Outperform. An outperform rating conveys an expectation that the stock will outperform the BIST-100 Index (XU100) within the next 6 to 12 months. Neutral. A neutral rating would convey an expectation that the stock will perform broadly in line with the BIST-100 (XU100) Total Return Index. Underperform. An underperform rating conveys an expectation that the stock will yield a return below that of the BIST-100 (XU100) Total Return Index within the next 6- to 12-month period. Not Rated (N/R). A not rated rating is assigned when the analyst does not have adequate conviction about the stock s total return relative to the BIST-100 (XU100) Total Return Index or to the average total return of the analyst s industry coverage universe, on a risk-adjusted basis, over the next 6 to 12 months. Under Review (U/R). An under review rating is temporarily assigned when the analyst starts an appraisal process of the rating for a potential revision, or the issuer has a significant material event with further information pending or to be announced. This does not revise the previously published rating, but indicates that the analyst is actively reviewing the investment rating or waiting for sufficient information to re-evaluate the analyst s expectation of total return on equity. Disclosure AK INVESTMENT does and seeks to do business with companies covered in its research reports. AK INVESTMENT may rely on information barriers, such as Chinese Walls to control the flow of information within the areas, units, divisions, groups, or affiliates of AK INVESTMENT. While the analyst will have endeavoured to be objective in the preparation of this report, investors should be aware of any implications of such a relationship on the objectivity of the report, or unintended conflicts of interest which may have arisen in its preparation. Investors should consider this report as only a single factor in making their investment decision. AK INVESTMENT, any of its parents, subsidiaries or affiliates, agents, and/or their respective officers, directors or employees may hold positions and at any time make purchases or sales as a principal or agent of the securities referred to herein.

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