Store Expansions And Sustainability Initiatives Will Drive Future Success

Key Takeaways

• Store expansion, particularly in Turkey, Morocco, and Egypt, aims to drive revenue growth, supported by a strong investment drive.
  
• Sustainability and cost control initiatives, including solar investments and energy efficiency, could enhance operational efficiency and improve margins.
  
• Rising operating expenses and ongoing investigations, coupled with no benefit from tobacco and alcohol sales, negatively impact BIM's margins and financial outlook.

Catalysts

Operates retail stores in Turkey, Morocco, and Egypt.

• The company's ongoing store expansion program, both domestically and internationally, is expected to drive future revenue growth as new locations open and mature. This includes plans for continued store openings in Turkey, Morocco, and Egypt, maintaining a high investment appetite in 2025. (Revenue)
  
• BIM's investment in sustainability projects, including significant investment in solar energy and efforts to reduce greenhouse gas intensity, could result in enhanced operational efficiencies and cost savings, potentially improving net margins. (Net Margins)
  
• The FILE operation spin-off into a separate company, while still fully consolidated, might allow for streamlined operations and growth of this high-performing segment, which could positively impact earnings. (Earnings)
  
• Improving inflationary conditions, particularly normalization of core goods inflation, could help BIM's like-for-like revenues to align better with CPI, which might result in improved EBITDA through better pricing strategies and margin improvements. (EBITDA)
  
• Energy efficiency projects and cost control measures in utility expenses are expected to help manage operating expenses, which, combined with efficiency improvements in operations, could aid in maintaining or improving the EBITDA margin. (EBITDA)

BIM Birlesik Magazalar Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming BIM Birlesik Magazalar's revenue will grow by 20.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.6% today to 6.7% in 3 years time.
• Analysts expect earnings to reach TRY 60.9 billion (and earnings per share of TRY 55.97) by about March 2028, up from TRY 18.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.3x on those 2028 earnings, up from 14.6x today. This future PE is lower than the current PE for the TR Consumer Retailing industry at 16.2x.
• Analysts expect the number of shares outstanding to decline by 0.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 27.67%, as per the Simply Wall St company report.

BIM Birlesik Magazalar Future Earnings Per Share Growth

Risks

• Traffic numbers remained negative in the fourth quarter despite overall like-for-like sales growth, which may continue to pressure revenue if the trend doesn't reverse.
  
• BIM does not benefit from the shift to modern retailers for tobacco and alcoholic beverages, which affects revenue compared to competitors who offer these products.
  
• Operating expenses, particularly personnel costs, have been rising faster than sales, impacting net margins and earnings.
  
• The company has temporarily increased early payments to suppliers, causing a deterioration in working capital and a potential risk to cash flow.
  
• Ongoing investigations by competition authorities could present a risk to the company’s reputation and financial outlook, potentially impacting future earnings.

Valuation

• The analysts have a consensus price target of TRY760.477 for BIM Birlesik Magazalar based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of TRY985.0, and the most bearish reporting a price target of just TRY660.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be TRY909.9 billion, earnings will come to TRY60.9 billion, and it would be trading on a PE ratio of 15.3x, assuming you use a discount rate of 27.7%.
  
• Given the current share price of TRY455.5, the analyst price target of TRY760.48 is 40.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.