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Coca-Cola Içecek Anonim Sirketi

Emerging Market Expansion And Fuse Tea's Growth To Continue Boosting Revenues And Margins

AN
Consensus Narrative from 13 Analysts
Published
18 Dec 24
Updated
02 Apr 25
Share
AnalystConsensusTarget's Fair Value
₺82.85
35.7% undervalued intrinsic discount
02 Apr
₺53.25
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1Y
-4.7%
7D
-0.7%

Author's Valuation

₺82.8

35.7% undervalued intrinsic discount

Analyst Price Target Fair Value

Key Takeaways

  • Strategic focus on low per capita markets and diverse product portfolio aims to boost volume growth and revenue streams.
  • Investment in operational efficiency and adapting to consumer trends enhances distribution and revenue per unit.
  • Macroeconomic challenges, high inflation, and geopolitical tensions are impacting demand and consumer purchasing power, thereby pressuring Coca-Cola İçecek's revenues and profitability.

Catalysts

About Coca-Cola Içecek Anonim Sirketi
    Engages in the production, sales, and distribution of sparkling and still beverages in Turkey, Pakistan, Central Asia, and the Middle East.
What are the underlying business or industry changes driving this perspective?
  • Coca-Cola Icecek is capitalizing on low per capita beverage consumption in its markets, particularly in countries like Iraq, Kazakhstan, and Azerbaijan, suggesting significant potential for future volume growth and increased revenue.
  • The company's focus on diversifying its product portfolio with growth in the stills category, exemplified by the performance of Fuse Tea, indicates an initiative that could enhance revenue streams and improve net margins.
  • Strategic investments in new factories, such as in Kazakhstan, are setting up Coca-Cola Icecek for more efficient operations and improved distribution, which could positively impact earnings through better cost management.
  • The emphasis on smaller packages and immediate consumption packages reflects a strategic maneuver to optimize the mix and cater to changing consumer preferences, potentially boosting revenue per unit case.
  • Coca-Cola Icecek's revenue growth management strategy, which prioritizes mix management and optimization over straightforward pricing increases, is designed to drive sustainable revenue and margin growth even in challenging macroeconomic conditions.

Coca-Cola Içecek Anonim Sirketi Earnings and Revenue Growth

Coca-Cola Içecek Anonim Sirketi Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Coca-Cola Içecek Anonim Sirketi's revenue will grow by 26.3% annually over the next 3 years.
  • Analysts assume that profit margins will shrink from 10.8% today to 9.4% in 3 years time.
  • Analysts expect earnings to reach TRY 26.2 billion (and earnings per share of TRY 9.4) by about April 2028, up from TRY 14.8 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 18.4x on those 2028 earnings, up from 10.1x today. This future PE is greater than the current PE for the GB Beverage industry at 10.1x.
  • Analysts expect the number of shares outstanding to remain consistent over 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.

Coca-Cola Içecek Anonim Sirketi Future Earnings Per Share Growth

Coca-Cola Içecek Anonim Sirketi Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Ongoing macroeconomic pressures, persistent high inflation, and weakening consumer purchasing power, particularly in Turkey, are negatively impacting demand, which in turn could put pressure on revenues and profitability.
  • The conflict in the Middle East has a spillover effect, leading to prolonged dent on consumer confidence and weakening purchasing power in key operating regions, potentially affecting future earnings growth.
  • Challenges in international markets, such as a 22.9% decline in Pakistan's volume, due to new taxation and macroeconomic instability, can hamper consolidated revenue and profit margins.
  • High Turkish inflation combined with lack of minimum wage adjustment is leading to reduced consumer spending, particularly in discretionary items like sparkling beverages, potentially impacting revenue growth and net margins.
  • The impact of delayed or limited price increases due to efforts to remain affordable amidst macroeconomic challenges constrained EBITDA margins by 458 basis points year-on-year in international operations, which could affect future earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of TRY82.846 for Coca-Cola Içecek Anonim Sirketi 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 TRY92.0, and the most bearish reporting a price target of just TRY73.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be TRY277.2 billion, earnings will come to TRY26.2 billion, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 27.7%.
  • Given the current share price of TRY53.25, the analyst price target of TRY82.85 is 35.7% 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.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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