It’s all about the top-down outlook – keeping positive sector view

Upgraded POs suggest 24-30% upside potential We update our models for the latest results and the TAS29 impact (inflation accounting). Our PO upgrades (Exhibit 1) reflect stronger-than-expected results and a higher terminal growth rate (10% vs 8% previously) as double-digit inflation will likely stay for longer Our new POs imply 24-30% upside potential, and we reiterate our Buy ratings on BIM, CCI and Anadolu Efes. (1) We believe the rerating story will be key for the shares over the next 4-6 quarters as tighter economic policies bear fruit and normalise the broader risk profile. (2) The companies are navigating external headwinds well (3-18% real revenue growth in 2023), gaining share, and are well positioned to capitalise on further market formalisation (BIM) and structurally increasing per-capita consumption (CCI).

BIM: nearly 5ppt share gain since 2019, and more to come Near term, we see BIM benefitting from rising pressure on purchasing power (Exhibit 4) amid still high CPI. This bodes well for further grocery market formalisation (Exhibits 9 10) as consumers shift to cheaper organised players, and BIM’s volume/LfL growth and share gains (Exhibit 14). New store rollout should also be on track with recent years: our white-space analysis (Exhibit 12) illustrates that pursuing the current expansion pace is feasible over the medium run.

CCI: mid-single-digit volume growth, margin resilience Easy 2023 comps, a likely strong tourism season in Türkiye (Exhibit 8), a possible macro recovery in Pakistan and consolidation of Bangladesh should support 5% volume growth in 2024E. Coupled with regular price adjustments and mix improvements (Exhibit 26), this suggests to us potential for double-digit real revenue growth this year. Margins should also hold up well as favourable hedges are in place (Exhibit 24).

Efes: pending resolution in Russia, while Türkiye shines Pending negotiations with Anheuser-Busch InBev regarding separation of a 50-50 JV in Russia continue to add uncertainty, though may unlock much value, we think. Meanwhile, we are encouraged by Efes’s progress in Türkiye, which may pose upside risks to mid term forecasts given significant scope to regain lost market share (Exhibit 22).

1ppt lower CoE = 7-8% impact on estimated equity value Despite a 50-60% share price rally YTD, market data (Exhibit 27), which coincides with feedback from some investors we speak to, still suggests low positioning in Türkiye’s equities by foreign investors, though a fair amount of interest as fundamentals are strong and clients see value in the market. Consistent disinflation (potentially from Q3E, Exhibit 2) would be key for sentiment to improve, we think. We estimate that each 1ppt decline in the cost of equity for the three companies (we apply 25-32% now) would imply a c.7-8% positive impact on our estimated fair equity values (Exhibits 39-41), all else equal.