International investment bank HSBC has published a new analysis report for BİM Mağazacılık stocks, one of the important players in the Turkish market sector. In the report, in which the activities of BIMAS are analyzed in detail, the potential of the company to increase its market share is highlighted, and it is pointed out that BIMAS stock prices are traded below the historical P/E averages and that there is a 60 percent premium potential compared to these averages. HSBC also increased the target price for the shares from 200 TL to 215 TL (the final price of BIMAS stock was 167.30 TL as of 12 June 2023 at 12.08).
Highlights from HSBC’s BIMAS share report:
- BİM is the leader in the Turkish grocery market with a 14% market share and has growth potential.
- A strong discount brand, strategic format diversification and efficient SKU (stock control) management support growth and profitability.
- We repeat the “Buy” recommendation and increase the target price to 215 TL (from 200 TL); BİM is currently trading at a discount of approximately 60% relative to the historical average P/E.
Greater growth potential
We think it is a positive situation for BİM; As the leading food retailer in Turkey, BİM has a solid business model that is difficult to imitate at its current scale. There is more room for growth in Turkey, supported by consolidation among larger players and the low penetration organized food retail market. According to our analysis, BİM can reach 22-25% market share in the long run (and maybe more); It has a market share of approximately 14% at the end of 2022. Although competition is increasing, we think there is growth potential for multiplayer. We expect about eight more years of structural support, which is a positive situation for BİM. We expect BİM’s strategy to be based on its ability to sustain high levels of domain expansion and deliver consistently above-inflation growth rates, including a gradual increase in SKUs over the years.
The most efficient food retailer in Turkey
As the leader of Turkish food retail, BİM managed operating expenses better than its competitors during difficult times. BİM was able to control operating expenses when necessary and reflected the increased costs to the consumer relatively easily. Since 2009, BİM’s EBITDA margin has remained above 5.0% on average, demonstrating a strong profitability level stance in the face of continued expansion of space and various macroeconomic challenges. The average EBITDA margin has increased from 5.1% in 2009-2016 to approximately 6.1% in the last five years (before IFRS 16), and we consider it sustainable in the long run given BİM’s operational cost discipline and large scale advantage. Like all industry players, BİM experienced some cost challenges in the first quarter of this year due to higher salaries and earthquake-related costs; however, we expect a gradual normalization for the remainder of the year.
Continued “Buy” recommendation, increased target price to 215 TL
We think that BİM is one of the best positioned food retailers in Turkey, growing its business rapidly with stable and increasing margins. BİM is currently trading at a discount of around 60% relative to its historical average P/E (for a 10-year average of 20x versus 8.3x on the 2023 estimation). Despite challenges such as increased competition and changing consumer trends, BİM has balance sheet power (approximately TL 3.8 billion in net cash) to accelerate investments when needed.
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