Equity / Large Cap.

/ REIC

Emlak Konut REIC 06/09/2022

Price Target Revision BUY

Upside Potential 43%
BUY Reiterated with a revised PT
Stock Data TL US$
Reflecting 2Q22 financial results, and our updated macro assumptions, we raise
Price 4.38 0.24
our PT for EKGYO to TL6.25/share and maintain our BUY recommendation for Target Price 6.25 0.31
the shares, offering 43% upside potential. The share is trading at 41% Prev.TP 0.00 0.00
discounted to its NAV, while historical average is discount of 48%. Mcap (mn) 16,644 913
Float Mcap (mn) 8,430 462
Review of 2Q22 Financial Results Avg.Daily Volume (3M, mn) 829.7 79.6
No. of Shares Outstanding (mn) 3,800
Below the estimates (Is Investment: TL1.007mn; Consensus: TL769mn), Emlak Free Float (%) 51
Konut recorded TL678mn net income in its 2Q22 financials, roughly 12% lower Foreign Share (%) 32

than the consensus estimates. 2Q22 revenues realized at TL2.351mn in line Price Perf. (%) 1 Mn Ytd 12 Mn
with expectations, up by 16% YoY. The part of deviation from the estimations TL 25.1 112.6 144.7
possibly stemmed from the fact that delivery of the projects shifted to other US$ 23.3 55.6 11.5
Rel.to BIST-100 2.5 17.6 7.0
quarters and thus, the revenue generating effect of the sales did not appear in
Multiples 2021A 2022E 2023E
the net profit; even if the strong sales revenues and remarkable turnkey project
P/E 11.6 7.8 6.8
sale performance recorded in 2Q22. Moreover, gross margin was realized at P/BV 1.0 1.0 0.9
59% improving by 29 ppt YoY and 13 ppt QoQ. Around 33% higher than the EV/EBITDA 9.1 7.4 6.5

estimates, EBITDA came in at TL1.169mn, registering a margin of 49.7% in

2Q22. Contrary to previous quarters, the net debt outlook of the company Price / Relative Price
seems to have turned to negative in 2Q22 recording a net financial debt of TL 5.00 120

4.00 100
627 mn, while recording TL41mn financial receivable. The negative impact of i)
80
rising construction costs, ii) operating expenses, and iii) financing cost (due to 3.00
60
high interest rate environment and persistent inflation) have been reflected in 2.00
40
the balance sheet in this quarter, which seems to be the main reason for the EKGYO Close(LHS)
1.00 20
EKGYO Relative to BIST100
deviation in the estimates. 100 Base
0.00 0
09/21

11/21

01/22

03/22

05/22

07/22

Solid performance in 1H22

52 Week Range (Close TL) 1.70 4.38
In the first half of 2022, Emlak Konut completed 12 tenders, and the average
multiplier in these auctions realized as 6.53x. While the total sales revenue Foreign Share (%) Cur.(%) : 32.30
50
from the tenders was 57 billion TL, the total revenue of the Company's share
was 19.4 billion TL. Recall that in 1H22, Emlak Konut announced TL14.6bn pre-
sales revenue from the sales of 2.510 units in total. Additionally, Emlak Konut Foreign Share (%)
3M Average
has a pre-sales target of TL27bn for 2022. Although the interest rates are
0
08/06

22/06

06/07

25/07

08/08

22/08

relatively high, the solid demand for real estate, fed by investors in search of a
safe haven due to the excessive surge in inflation, continues to bring along
housing inflation and an increase in housing sales revenues. Emin Yetkin Erturk
[email protected]
0
Please refer to important disclaimer at the end of this report. 1
Emlak Konut REIC

Therefore, the company's pre-sales performance and cash generation continue to be positively affected. However, after
registering solid net profit in the first quarter, the revenue generated in the 2Q22 has been normalized to some extent and it
seems to be back on the company's expectation track. Lastly, the company is expected that the net profit will be TL 1,440mn in
2022YE. Yet, considering positive atmosphere and successful performance, the net profit will possibly realize higher than the
expectation.

Our revised 2022 estimations

Considering the strong financial results, positive dynamics for Emlak Konut REIC in the real estate sector and the company's
strong project portfolio, we update our estimates for Emlak Konut REIC following the realizations in the 1H22. Accordingly, we
increase our 2022 sales revenue estimate to TRY8,205mn, while changing our EBITDA estimate to TRY2,169mn. Lastly, our
updated net profit estimate is TL 2,14 billion for 2022-year end.

Risks to our call

Political and regulatory risks, potential interest rate hike, demand shock triggerred by further deterioration in macroeconomic
indicators and increase in inflation in way to jeopardize economic activities are key risk factors for our estimates and valuation.

2
 Emlak Konut REIC

Shareholder Structure (%) Company Description

Other 50.7 Emlak Konut Gayrimenkul Yatirim Ortakligi AS (Emlak Konut) is a Turkey-based real estate
investment trust. The Company is a subsidiary of Housing Development Administration of Turkey
T.C.Çevre Ve Şehircilik Bakanliği Toplu Konut Idaresi Başkanliği 49.3 (Toplu Konut Idaresi Baskanligi, TOKI). Its portfolio includes housing units, commercial units and
estates.

Income Statement (mn ₺) 2020A 2021A 2022E 2023E Balance Sheet (mn ₺) 2020A 2021A 2022E 2023E
Net Sales 4,527 5,736 8,205 9,959 Current Assets 22,741 25,585 26,898 28,551
Gross Profit (Loss) 1,120 2,205 2,872 3,486 Cash and Cash Equivalents 1,951 3,634 3,271 2,944
Operating Expenses 378 476 748 1,073 Short-Term Trade Receivables 2,484 2,678 2,378 2,698
Core Operating Profit 742 1,729 2,124 2,413 Inventories 15,192 17,562 18,264 18,629
Non-operating Income (Exp.) 368 89 133 177 Other Current Assets 3,114 1,711 2,985 4,280
Net Financial Income (Exp.) -251 -384 -119 -156 Long Term Assets 4,938 5,045 5,835 7,086
PBT 860 1,434 2,138 2,434 Tangible Fixed Assets 72 78 95 117
Tax Expense (Income) 0 0 0 Intangible Fixed Assets 4 3 4 4
Net Profit 860 1,434 2,138 2,434 Other Long-Term Assets 1,149 498 608 741
Recurring Net Profit 860 1,434 2,138 2,434 Total Assets 27,679 30,629 32,732 35,637
NOPAT 742 1,729 2,124 2,413 Short Term Liabilities 10,153 12,731 18,811 20,357
EBITDA 770 1,755 2,169 2,478 Short-Term Financial Loans 2,078 2,710 2,981 2,832
Short-Term Trade Payables 2,469 1,976 2,568 3,082
Growth & Operating Perf. 2020A 2021A 2022E 2023E
Other Short-Term Liabilities 5,606 8,045 13,261 14,443
Growth
Long Term Liabilities 3,003 2,021 1,699 2,072
Net Sales -20% 27% 43% 21%
Long-Term Financial Loans 2,931 1,907 1,526 1,831
EBIT -38% 133% 23% 14%
Other Long-Term Liabilities 67 107 173 240
EBITDA -37% 128% 24% 14%
Equity 14,522 15,877 17,339 17,635
Net Profit -53% n.a 49% 14%
Parent Shareholders Capital 14,522 15,877 17,339 17,635
Operating Performance
Share Capital 3,800 3,800 3,800 3,800
Gross Margin 24.7% 38.4% 35.0% 35.0%
Reserves and Other Items 9,863 11,401 11,401 11,401
EBIT Margin 16.4% 30.1% 25.9% 24.2%
Current Year Income (Losses) 860 1,434 2,138 2,434
EBITDA Margin 17.0% 30.6% 26.4% 24.9%
Total Liabilites & Equity 27,679 30,629 37,849 40,064
Effective Tax Rate 0.0% 0.0%
Net Profit Margin 19.0% 25.0% 26.1% 24.4%
Cash Flow (mn ₺) 2020A 2021A 2022E 2023E
ROE 6.1% 9.4% 12.9% 13.9%
Net Cash from Operations 1,131 2,571 919 -3,120
ROA 3.4% 4.9% 6.7% 7.1%
Earnings Before Adjustments 860 1,434 2,138 2,434
Depreciation & Amortisation 28 26 45 65
Ratio Analysis 2020A 2021A 2022E 2023E
Change in Working Capital 367 792 -1,431 -5,704
Adj. P / E (x) 19.4 11.6 7.8 6.8
Other Operating Cash Flow -124 318 167 86
EV / EBITDA (x) 20.8 9.1 7.4 6.5
-286 171 -57 57
EV / Sales (x) 3.5 2.8 2.0 1.6 Cash from Inv. Operations
-9 -15 -12 -14
P / B (x) 1.1 1.0 1.0 0.9 Capital Expenditures
Other Inv. Cash Flow -277 -277 186 -45
EPS (₺) 0.2 0.4 0.6 0.6
845 2,741 2,741 861
DPS (₺) 0.0 0.0 0.1 0.1 Free Cash Flow
-173 -815 -815 -586
Dividend Yield 0.8% 1.2% 3.5% 1.3% Cash from Fin. Operations
179 -414 -110 156
Net Debt (Cash) (mn ₺) 3,058 983 1,236 1,719 Change in Financial Debt
83 86 359 214
Net Debt / EBITDA (x) 4.0 0.6 0.6 0.7 Dividends Paid
Net Debt / Equity (x) 0.2 0.1 0.1 0.1 Other Financing Cash Flow -278 -278 -321 -117
Source: Is Investment Net Change in Cash 672 672 1,936 277

3
Emlak Konut REIC

IFRS Income Statements (TL mn) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 6M21 6M22
Net Sales 798 2,025 1,919 993 2,172 2,351 2,824 4,523
Gross Profit 310 608 615 672 997 1,394 918 2,391
Operating Expenses 81 155 94 146 133 231 236 364
EBIT 229 453 521 526 865 1,162 682 2,027
Depreciation & Amortization 9 9 8 0 6 6 18 12
EBITDA 238 461 529 526 871 1,169 699 2,039

Non-Operating Income (Expense) 13 66 -164 -209 -94 -484 78 -578

Operating Income (Expense) from Other Operations 82 153 -27 -149 -89 -333 235 -422
Profit (Loss) from Subsidiaries 0 0 0 0 0 0 0 0
Income (Expense) from Investing Activities 3 0 0 28 0 9 3 9
Net Financial Income (Expense) -72 -88 -137 -88 -5 -160 -159 -164
PBT 242 519 357 317 771 678 760 1,449
Tax Income (Expense) 0 0 0 0 0 0 0 0
Current Corporate Tax Income (Expense) 0 0 0 0 0 0 0 0
Deferred Tax Income (Expense) 0 0 0 0 0.00 0 0 0
Net Profit After Tax 242 519 357 317 771 678 760 1,449
Profit After Taxes from Discontinued Operations 0 0 0 0 0 0 0 0
Minority Interest 0 0 0 0 0 0 0 0
Net Profit 242 519 357 317 771 678 760 1,449
NOPAT 229 453 521 526 865 1,162 682 2,027
0%
Growth & Profitability 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 6M21 6M22
Growth
Sales Growth (y/y) 16% 203% -15% 10% 172% 16% 109% 60%
Opex Growth (y/y) 33% 105% -22% 20% 63% 49% 73% 54%
EBIT Growth (y/y) 3% 219% 79% 511% 278% 157% 87% 197%
EBITDA Growth (y/y) 0% 223% 78% 471% 266% 153% 83% 192%
NI Growth (y/y) 86% 307% 8% 17% 219% 31% 196% 91%
Margins
Gross Margin 38.9% 30.0% 32.1% 67.7% 45.9% 59.3% 32.5% 52.9%
Opex to Sales 10.2% 7.7% 4.9% 14.7% 6.1% 9.8% 8.4% 8.0%
EBIT Margin 28.7% 22.4% 27.1% 53.0% 39.8% 49.5% 24.1% 44.8%
EBITDA Margin 29.8% 22.8% 27.6% 53.0% 40.1% 49.7% 24.8% 45.1%
Net Margin 30.3% 25.6% 18.6% 31.9% 35.5% 28.8% 26.9% 32.0%
PBT Margin 30.3% 25.6% 18.6% 31.9% 35.5% 28.8% 26.9% 32.0%
ROE (Annualized) 6.8% 9.3% 9.2% 9.3% 12.4% 13.1% 9.3% 13.1%
ROA (Annualized) 3.6% 4.9% 5.0% 5.0% 6.4% 6.4% 4.9% 6.4%
Effective Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating Cash Flow Margin 12.7% 3.6% 15.7% 211.1% 47.7% -25.8% 6.2% 9.5%
Free Cash Flow Margin 48.8% 1.5% 15.7% 203.6% 46.4% -30.5% 14.8% 6.5%
Operational Cash Flow / EBITDA 42% 16% 57% 398% 119% -52% 25% 21%

IFRS Cash Flow Statements (TL mn) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 6M21 6M22
Net Cash from Operations 101 73 300 2,096 1,037 -605 174 431
Earnings Before Adjustments 242 519 357 317 771 678 760 1,449
Depreciation & Amortisation 9 9 8 0 6 6 18 12
Others -1 -12 158 174 -138 307 -13 169
Change in Working Capital -148 -442 -223 1,605 398 -1,597 -590 -1,199
Cash from Investment Operations 289 -43 0 -74 -29 -111 245 -139
Capital Expenditures -3 -9 -1 -2 -5 15 -12 10
Cash from Other Investment Operations 292 -35 1 -72 -24 -126 257 -150
Free Cash Flow 390 30 300 2,022 1,008 -716 419 292
Cash from Financial Operations -392 -901 639 -161 -752 982 -1,293 230
Change in Financial Debt -251 -785 773 -151 -610 1,382 -1,036 772
Dividends Paid 0 -79 0 0 0 -376 -79 -376
Cash from Other Financial Operations -141 -36 -134 -11 -141 -25 -177 -166
Effect of Exchange Rate 0 0 0 0 0 0 0 0
Net Change in Cash & Cash Equivalents -3 -871 940 1,860 256 265 -874 522

4
Emlak Konut REIC

IFRS Balance Sheet (TL mn) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Current Assets 23,726 22,856 23,108 25,585 29,935 32,666
Cash and Cash Equivalents 1,746 1,468 1,502 3,635 3,843 5,976
Short-Term Trade Receivables 3,014 3,207 2,962 2,678 1,940 2,523
Inventories 16,122 15,610 16,946 17,562 22,288 22,017
Other Current Assets 2,844 2,572 1,699 1,710 1,864 2,149
Long Term Assets 4,603 4,996 5,075 5,045 5,410 5,508
Long-Term Financial Assets 0 0 0 0 0 0
Investments with Equity Method 0 0 0 0 0 0
Tangible Fixed Assets 74 80 79 78 77 70
Intangible Fixed Assets 4 4 3 3 6 5
Right of Use Assets (IFRS 16) 0 0 0 0 0 0
Other Long-Term Assets 4,525 4,912 4,992 4,963 5,326 5,432
Total Assets 28,330 27,852 28,183 30,629 35,344 38,173
Short Term Liabilities 11,141 10,284 10,542 12,731 16,968 18,484
Short-Term Financial Loans 2,339 1,676 2,719 2,710 2,274 2,749
Short-Term Trade Payables 2,819 2,298 1,855 1,976 6,139 4,727
Other Short-Term Liabilities 5,983 6,309 5,968 8,045 8,556 11,008
Long Term Liabilities 2,425 2,366 2,081 2,021 1,728 2,739
Long-Term Financial Loans 2,353 2,281 1,983 1,907 1,610 2,600
Other Long-Term Liabilities 72 84 98 114 118 139
Equity 14,764 15,203 15,560 15,877 16,648 16,950
Parant Share 14,764 15,203 15,560 15,877 16,648 16,950
Total Liabilities and S.Holders' Equity 28,330 27,852 28,183 30,629 35,344 38,173

Investments & Indebtness 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22

Net Capex 3 9 1 2 5 -15
Capex to Sales 0.4% 0.4% 0.1% 0.2% 0.2% -0.6%
Inflow (Outflow) for WCR (Cash Flow Statement) -148 -442 -223 1,605 398 -1,597
Change in WCR / Sales -18.6% -21.8% -11.6% 161.7% 18.3% -68.0%
Net Debt (Cash) 2,945 2,489 3,200 983 41 -627
Net Debt / EBITDA (Annualized) 3.8 2.3 2.4 0.6 0.0 -0.2

5
Emlak Konut REIC

Relative to BIST 100 / Recommendations

110

UR
OP

OP
TL

OP
100

OP
90
80
70
60
50
40

11/21
12/21
12/21
12/21

03/22
03/22
04/22
04/22

07/22
07/22
07/22
08/22
09/21
09/21
09/21
09/21
10/21
10/21
10/21
10/21
11/21
11/21
11/21
11/21

12/21
01/22
01/22
01/22
01/22
01/22
02/22
02/22
02/22
02/22
03/22
03/22

04/22
04/22
05/22
05/22
05/22
05/22
05/22
06/22
06/22
06/22
06/22
07/22

08/22
08/22
08/22
08/22
09/22
EKGYO Relative to BIST100

Number of Companies Rec. Breakdown for Coverage

10
OP MP UP UR NR
8 16
2
6 3
4
2 14
0 66

Construction

Airlines
Beverages
Food

Technologly

Retail Trade
Integrated
Glass

Communication

Consumer
Utilities
Cement&Concret

Pharm. and

Insurance
Iron Steel

Conglomerate

REIC
Petroleum
Furniture
Techology

Banking
Mining

Automotive &
Durables
Defense

Textile
Health

Parts
e

BUY UNDER REVIEW NOT RATED SELL HOLD

Estimated Forward
Estimated Forward P/E
P/E & 12M Trailing P/E Estimated Forward P/BV & Current P/BV
10.00
10.00 1.20

8.00
8.00 1.00
0.80
6.00
6.00
0.60
4.00
4.00
0.40
2.00
2.00 0.20
0.00
0.00 0.00
09/21
10/21
11/21

06/22
07/22
08/22
12/21
01/22
02/22
03/22
04/22
05/22

01/22

02/22
03/22

05/22

07/22
09/21
10/21

11/21
12/21

04/22

06/22

08/22
Estimated Forward
Estimated Forward P/E 12M Trailing P/E Estimated Forward P/BV Current P/BV

This  report  has  been  prepared  by    “İş  Yatırım  Menkul  Değerler  A.Ş.” (İş  Investment)  solely  for  the  information  of  clients  of  İş  Investment.  Opinions  and 
estimates  contained  in  this  material  are  not  under  the  scope  of  investment  advisory  services.  Investment  advisory  services  are  given  according  to  the 
investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks  and the clients. Opinions 
and recommendations contained in this report reflect the personal views of the  analysts  who supplied them. The investments  discussed or recommended 
in  this  report  may  involve  significant  risk,  may  be  illiquid  and  may  not  be  suitable  for  all  investors.  Investors  must  make  their  decisions  based  on  their 
specific investment objectives and financial positions and with the assistance of independent advisors, as they believe necessary.   

The information presented in this report has been obtained from public institutions, such as  Istanbul Stock Exchange (ISE), Capital Market Board of Turkey 
(CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of Turkey (CBT);  various media institutions, and 
other sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.

All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in any way, nor may 
this  information  be  printed  for  distribution  purposes  or  forwarded  as  electronic  attachments  without  the  prior  written  permission  of  İş  Investment. 
(www.isinvestment.com)