Garanti Securities - Company Reports - ÜLKER BISKÜVI (ULKER)

June 18 2015
RESEARCH
Ulker Biskuvi
Outperform
Turkey - Equity - Food & Beverages

Coverage Initiation
A tough cookie
Current Mcap (TLmn)
5,968
Current EV (TLmn)
6,279
Current Mcap (US$mn)
2,199
Price Performance (TL)

21.00
years from an operational and corporate governance perspective
18.00
with its efforts to enhance transparency and efficiency. We expect
15.00
a CAGR of 12% in revenues and 17% in EBITDA over next 3
12.00
9.00
01.14
years, with the Company preserving its domination of the market.

EBITDA margin set to improve by 1.6pp in 2014-2017E period.
We expect the Companys EBITDA margin to edge up by 1.6pp to
13.1% over the next 3 years through a combination of cost
ULKER
05.15
prospects. Ulker Biskuvi has evolved successfully in the last 3
22%
03.15
Astute maneuvers on corporate strategy with bullish mid-term
Potential Return TL
01.15
prices yet facing pressure from strong US$, with a 0.9pp rise in
the gross margin projected in 2015 through price adjustments
and product mix initiatives.
21.30TL
11.14
Ulker Biskuvi to benefit from the stabilization in commodity
12M Target Price TL
09.14
course to post a CAGR of 12% in revenues and 17% in EBITDA

over next 3 years, holding on to its rock-solid brand identity.
17.45TL
07.14
As a pioneer in the confectionery business, Ulker Biskuvi is on
Current Price TL
05.14
recommendation and a 12 month price target of TL21.30

indicating 22% upside potential.
03.14
We initiate our coverage for Ulker Biskuvi with an OP
BIST-100
management and improved operational efficiencies. We expect

relatively stable raw material costs, an improvement in product
mix management through new higher-margin launches and
economies of scale.
Stock Market Data

Bloomberg/Reuters:
Relative Performance:
ULKER.TI / ULKER.IS
1 mth
3 mth
12mth
-3%
-2%
-1%
Saudi Arabia and Egypt operations to unlock value by 2H15. The
52 Week Range (TL):
acquisition of a 55% stake in a facility in Saudi Arabia and 46%
Average Daily Vol (US$mn) 3 mth:
stake of a facility in Egypt will be finalized in 2015. Double digit
YTD TL Return:
-5%
top line growth is expected in Saudi Arabia; however, no growth is
Shares Outstanding (mn):
342
projected in Egypt, given the c.20% devaluation of the Egyptian
Free Float (%):
pound. Although acquisitions will contribute to revenues, they will
Foreign Ow nership in Free Float (%):
14.2 / 21.25
5.4
43
37%
be slightly dilutive on profitability margins in the short-term.
Research Analyst: Irem Okutgen
Financials and Ratios
2013
2014
2015E
2016E
Net Sales (TLmn)
2,748
2,891
3,190
3,587
EBITDA (TLmn)
315
332
381
457
Net Income (TLmn)
189
212
228
284
11.5%
11.5%
12.0%
12.7%
P/E (x)
31.6
28.2
26.1
21.0
+90 (212) 384 1155-58
EV/EBITDA (x)
19.9
18.9
16.5
13.7
[email protected]
EV/Sales (x)
2.28
2.17
1.97
1.75
EPS (TL)
0.55
0.62
0.67
0.83
DPS (TL)
0.39
0.27
0.47
0.58
EBITDA Margin
+90 (212) 384 1135
[email protected]
Sales Contact:
EMISPDF intellinet Please

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
SUMMARY FINANCIALS
The Company in Brief
Ulker Biskuvi, formerly Ulker Gida, was established
in 1944 and is the flagship of Yildiz Holding as the
pioneer confectionery company in Turkey. Yldz
Holding, the largest food manufacturer in MENA,
Central and Eastern Europe, recorded TL15.7bn of
turnover by YE13, focusing on multinational growth
through strategic partnerships in the food sector.
Ulker Biskuvi is engaged in the production of
chocolate, chocolate coated biscuits, biscuits and
cakes with 330 SKUs in domestic and international
markets from its 4 plants in Istanbul (Topkap, Silivri,
Gebze and Esenyurt) and 2 plants in Karaman and
Ankara. Ulker Biskuvi holds a 92% stake in Ulker
Cikolata and 74% of Biskot Biskuvi, and also has a
19% stake in Godiva Belgium BVBA. Ulker Biskuvi
have been quoted on BIST since 1996.
Shareholders
Yildiz Holding 49%, Yildiz Holding Subsidiaries and
Ulker Family Members 8%, Free Float %43
Income Statement (TLmn)
2013
2014
2015E
2016E
2015E/2014
Net Sales
2,748
2,891
3,190
3,587
10%
-2,115
-2,284
-2,491
-2,796
9%
Gross Profit (Loss)
633
608
699
791
15%
Operating Expenses
-370
-330
-374
-398
13%
Operating Profit
263
277
324
393
17%
EBITDA
315
332
381
457
15%
-240
-121
-161
-151
n.m.
Profit (Loss) before Tax
279
263
277
362
5%
Tax
-52
-28
-49
-79
72%
Net Income
189
212
228
284
8%
23.0%
21.0%
21.9%
22.1%
0.9 pp
9.6%
9.6%
10.2%
10.9%
0.6 pp
11.5%
11.5%
12.0%
12.7%
0.5 pp
6.9%
7.3%
7.2%
7.9%
-0.2 pp
Cost Of Sales
Net financial Income/ Expense
Ratios
Gross Profit Margin
EBIT Margin
EBITDA Margin
Net Income Margin
Balance Sheet (TLmn)

Current Assets
2015E/2014
2,129
2,037
2,285
2,347
12%
1,164
1,034
1,151
1,099
11%
Short Term Trade Receivables
649
604
699
776
16%
Inventories
198
212
239
268
12%
Other Current Assets
117
187
196
204
5%
Long Term Assets
1,033
1,151
1,272
1,338
11%
Total Assets
3,162
3,188
3,557
3,686
12%
Short Term Liabilities
1,827
657
845
893
29%
Short Term Financial Loans
1,250
91
227
219
148%
Short Term Trade Payables
508
511
560
613
9%
Other Short Term Liabilities
68
55
58
62
7%
67
1,301
1,348
1,304
4%
Long Term Financial Loans
10
1,244
1,287
1,239
3%
Other Long Term Liabilities
57
57
61
65
7%
Shareholders Equity
1,268
1,230
1,364
1,488
11%
T. Liabilities & S.holders Equity
3,162
3,188
3,557
3,686
12%
Cash and Cash Equivalents
Long Term Liabilities

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
INVESTMENT SUMMARY
We are initiating our coverage of lker Biskuvi with a Outperform
recommendation and 12M target price of TL21.30, denoting 22% upside potential.
Ulker, Turkeys leading food company which is specialized in the confectionery
business, has doubled its revenues in the last 5 years, boosting interest from
corporate investors and further enhancing the stocks liquidity, and has
outperformed the BIST index by 38% in the last 2 years. Ulker is set to expand its
EBITDA margin to 15% over the next decade, while maintaining its market leader
position. The Company notched up a CAGR of 17% at the top line and 61% in
EBITDA in the last 3 years and we expect Ulker Biskuvi to register a CAGR of
11% in revenues and 16% in EBITDA in 2014-2019E period. Ulker Biskuvi offers
lucrative growth prospects and better margins through cost management with the
launch of higher margin products and efficiency improvements over a long-term
investment horizon; the stock trades at a 2015E P/E of 26.1x and EV/EBITDA of
16.5x, marking 9% and 18% premiums over its international peers, respectively.
We believe the premium is justified on account of its dominating market position,
its defensive nature and the reasonably inelastic nature of the business.
A carefully crafted corporate strategy and upbeat mid-term

prospects
As a pioneer in the confectionery business with extensive brand awareness and
rock-solid brand image, Ulker Biskuvi has evolved successfully in the last 3 years
in terms of operational and corporate governance thanks to its transparency,
efficiency and consistency efforts. We expect a 12% CAGR in revenues and
further 17% CAGR in EBITDA over next 3 years with the Company preserving its
domination of the market. We expect its EBITDA margin to edge up by 1.6pp to
13.1% over the next 3 years through a combination of cost management and
improved operational efficiencies. We expect the relatively stable raw material
costs and the improvement in product mix management through the launch of new
higher margin offerings to carry margins higher and bring about improved
economies of scale in the medium term.
Cost dynamics to stabilize amid exchange rate fluctuations, leading

profit slide
The hike in the commodity prices due to drought Ulker Biskuvi hard on the cost
side; moreover the Ebola virus in Africa also precipitated hikes in cacao prices.
Ulker Biskuvi is set to benefit from the normalization in commodity prices in 2015
and we expect a 0.9pp improvement in the gross margin with 10% growth at the
top line through price increases and an enhancement in the product mix.
However, the depreciation of the local currency is taking its toll on the cost side
even though prices of its main raw materials (cacao and palm oil) have retreated.
Accordingly, Ulker Biskuvi is considering reductions in the size of those products
(smaller chocolate bars or boxes), which rely heavily on cacao, as a response to
higher cacao prices in order to better manage profitability.
3

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
Investments in Saudi Arabia and Egypt to unlock value by 2H15

The acquisition of a stake in a facility in Egypt will be finalized in the first half of
the year; while an acquisition in Saudi Arabia expected to be finalized by the end
of the year, on completion of ongoing paperwork and requirements in the country.
Ulker Biskuvi will become the majority stake holder in both Egypt and Saudi
Arabian operations following the buyouts. Its share in Saudi Arabia operations will
increase to 55%, with its share in Egyptian operations increasing to 46%. The
Saudi Arabia operations recorded a turnover of US$103mn with an 9% EBITDA
margin in 2014. Double digit top line growth is expected in US$ terms in 2015 with
a slight improvement in the EBITDA margin. Egypt recorded a US$42mn top line
in 2014 with an EBITDA margin of 13%; however, given the devaluation of around
20% in the Egyptian pound, no growth or margin improvement is projected for
2015. Although the acquisitions will contribute to consolidated sales, they will
dilute Ulker Biskuvis profit margins by negligible levels in the short term.
Acquisition of United Biscuits to bring potential synergies with

parent company, Yildiz Group
Yildiz Holding, the parent company, which holds a 57% stake in Ulker Biskuvi
including the shares owned by the Yildiz family, acquired United Biscuits, a UK
biscuits producer, in November 2014. United Biscuits recorded a top line of
1.1bn in 2013, and commands a market share of around 25% in the UK, being
the UKs second largest bagged snack company, the market leader in biscuits
industry in UK and the 6th largest biscuit producer in the world.
Ulker Biskuvi expects to create synergies with United Biscuits and is working on
such plans currently. Ulker expects to enjoy cost savings through procurement of
raw materials together with United Biscuits, which will lead to economies of scale,
especially in cacao and palm oil supplies. The Company has already started to
work on joint procurement opportunities and expects a 3-4% reduction in costs
through new procurement terms along with the expansion in the volumes.
Ulker Biskuvi expects to further optimize capacity utilization rates by producing
products in the United Biscuits plants and vice versa. Moreover, Ulker Biskuvi
expects to utilise United Biscuits sales & distribution network from 2016 to
support it in penetrating new regions. The Company targets joint selling
opportunities, especially in the markets where United Biscuits operates: Nigeria,
India, European countries and EMs, and vice versa. The synergies will become
more concrete by the end of the year.

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
Ulkers portfolio restructuring and new launches to contribute to

market share in the medium term
Ulker Biskuvi started to restructure its product portfolio at the end of 2011 and
eliminated unprofitable SKUs while keeping high-demand profitable ones.
Accordingly, the product range was whittled down from 520 SKUs in 2010 to
330SKUs as of 2014. The Company also focused on brand investments for the
star SKUs while revealing multichannel advertisements, including in social media.
The Company also realized distribution efficiencies and a 2.8pp reduction in sales
returns in 2011 with further 0.5pp reductions in both 2013 and 2014, while reaping
the rewards of its restructuring process. Through around 3 new product launches
in each category with a maximum of 8 products each year (Rodeo, Kup Gofret
and Riva launches in 2015), the Companys market share in biscuit category is
expected to rise from 46% in 1Q15 to 50% by 2016, with its market share in the
chocolate category set to rise from 47% in 1Q15 to over 50% by 2016 and its
share in the cake category rising from 34% to 35% by 2016.
Biskot Gdas optimization and integration efforts dragging down

volumes in the transition period
Ulker Biskuvi acquired a 30% stake in its subsidiary, Biskot Gda, from its minority
shareholder, the Tayyar Family (the founder of the Company), for TL200mn. This
acquisition brought its total stake in the Company to 74% in May 2014. Following
the acquisition, the Biskot Company initiated an SKU optimization process in the
last quarter of 2014, similar to the one undertaken at Ulker Biskuvi in 2011. As a
result, its product range was reduced from 1,200SKUs to 650SKUs and is
targeted to be cut further to 450SKUs in 2015. However, the optimization process
has hurt volumes and the top line growth at Biskot and, accordingly, for Ulker
Biskuvi, as a result of the transition period. However, its profitability has improved
through the program, with the Companys EBITDA margin edging up by 2pp in the
first quarter of 2015.
Sluggish exports preventing growth despite solid results at home

Ulker Biskuvi notched up 3% YoY sales volume growth in the domestic market in
both 4Q14 and 1Q15. However, the Company has languished in export markets
and in the Private Label (PL) category in the last couple of quarters, negatively
affecting volumes. Exports, constituting 17% of consolidated volumes (14% of
total revenues), suffered a 32% YoY plunge in volumes to 20,000 tonnes in Q1, in
what was the main reason behind the sluggish growth. This came on the back of
political instability in neighbouring countries. Export volumes to Iraq were down by
15% YoY with exports to Yemen tumbling by 17% YoY in 1Q15.
5

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Food & Beverages
Ulker Biskuvi
RESEARCH
Risks
Fluctuations in commodity prices, geographical and political instability in the
Companys operating markets, negative consumer sentiment and exchange rate
exposure pose risks for the Company. Ulkers profitability margins are sensitive to
volatility in raw material prices (cacao, palm oil, sugar, wheat, pistachio and nutpuree). Natural disasters, epidemics and uncertainty regarding the weather will
have both direct and indirect effects on the Companys financials. Ulker is mainly
exposed to volatility in the /TL and also US$/TL exchange rate on the cost front,
as the main raw materials are imported (cacao is imported from Ghana and Ivory
Coast in Africa and palm oil is imported from Malaysia and Indonesia). The
Company had a TL359mn short FX position as of 1Q15, which was denominated
in US$ currency (around US$120mn).

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
VALUATION
Our target Mcap for Ulker Biskuvi is based on both DCF valuation and a
comparison of peer group multiples, giving equal weight to both methods.
Accordingly, our 12M target Mcap of TL7.3bn indicates 22% upside potential.
Valuation Summary
Calculated Value
Weight in
Valuation
Total Value
DCF Analysis
8,238
50%
4,119
Peer Comp.
6,328
50%
3,164
TLmn
Target Value
7,283
Current Mcap
5,968
12M Target Share Price (TL)
21.30
Current Share Price (TL)
17.45
Upside Potential (TL)
22%
DCF Analysis
We calculated a target value of TL8,238mn for Ulker Biskuvi based on DCF
analysis, assuming a 4.0% terminal growth rate in our DCF model. We applied
8.75% as the TL risk free rate while assuming a market risk premium of 5.5% and
Beta of 0.7 in calculating the cost of equity. We applied a 10% cost of debt with a
corporate tax rate of 20%. Accordingly, we assume an average WACC of 10% for
the cash flows in our DCF analysis.
Assumptions and Results (TLmn) - 2015E

Weight of equity
40%
PV of FCF
2,737
Cost of Equity
13%
PV of Terminal Value
5,813
0.7
Implied Firm Value
8,550
Beta
Risk free rate
8.75%
Market Risk Premium
5.5%
Cost of Debt
10%
Tax rate
20%
WACC
10%
Terminal Value Growth
4.0%
Net Debt
Target Mcap
312
8,238
Source: Garanti Securities Estimates

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June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
DCF Analysis
Ulker Biskuvi - Free Cash Flow Projections (TLmn)
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
3,190
3,587
4,021
4,461
4,904
5,347
5,822
6,288
6,792
7,338
EBIT
324
393
455
533
610
687
771
838
911
986
Taxes
49
79
91
107
122
137
154
168
182
197
275
314
364
426
488
550
617
670
729
789
57
65
72
80
88
96
105
113
122
132
Gross cash flow
333
379
437
506
576
646
721
783
851
921
Change in WCR
73
53
51
53
54
54
58
56
61
66
Capex
150
108
113
116
118
118
116
113
122
132
Free Cash Flow
109
218
273
337
405
474
547
614
668
723
EBITDA
381
457
528
613
698
783
875
951
1,033
1,118
12.0%
12.7%
13.1%
13.7%
14.2%
14.6%
15.0%
15.1%
15.2%
15.2%
Revenues
NOPLAT
Depreciation
EBITDA Margin
Source: Garanti Securities

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Food & Beverages
Ulker Biskuvi
RESEARCH
Peer Group Comparison

Our peer group comparison implies a fair equity value of US$2.4bn for Ulker Biskuvi with equal weighting given to
valuations derived from the average 2015E-2016E EV/EBITDA, P/E and EV/Sales multiples of international peers.
Company
Chocoladefabriken Lindt & Sprungli AG
Lotus Bakeries
EV/EBITDA
P/E
EV/Sales
Country
MCAP
(US$mn)
2015E
2016E
2015E
2016E
2015E
2016E
SWITZERLAND
13,757
20.84
19.03
36.09
32.72
3.64
3.43
BELGIUM
1,201
15.66
14.86
25.70
24.39
2.94
2.80
Flowers Foods Inc
USA
4,533
11.54
10.94
22.34
20.75
1.39
1.36
Hershey Co/The
USA
19,902
12.57
11.79
21.04
19.36
2.84
2.70
13.52
12.78
20.51
19.09
2.60
2.48
14.58
13.19
23.45
19.93
1.28
1.23
14.79
13.77
24.85
22.71
2.45
2.33
Nestle SA
SWITZERLAND 240,030
Barry Callebaut AG
SWITZERLAND
6,530
Developed Markets
Want Want China Holdings Ltd
CHINA
13,781
13.11
12.01
19.42
17.78
3.31
3.05
Petra Foods Ltd
SINGAPORE
1,579
17.40
14.75
31.51
26.64
2.91
2.59
Mayora Indah Tbk PT
INDONESIA
1,692
13.58
11.00
27.84
20.31
1.57
1.36
Indofood Sukses Makmur Tbk PT
INDONESIA
4,327
8.30
7.51
13.21
12.06
1.22
1.13
SOUTH AFRICA
4,229
12.56
11.02
14.91
12.98
1.78
1.65
MEXICO
12,351
11.23
10.29
26.26
22.08
1.21
1.17
PHILIPPINES
8,610
17.24
14.80
28.51
24.10
3.53
3.10
Developing Markets
13.35
11.62
23.10
19.42
2.22
2.01
Ulker Multiple Valuation (US$mn)
2,105
2,180
2,204
2,205
2,828
2,752
Tiger Brands Ltd

Grupo Bimbo SAB de CV
Universal Robina Corp
Average (US$mn)
2,379
Source: Garanti Securities, Bloomberg

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Food & Beverages
Ulker Biskuvi
RESEARCH
Bloomberg vs. Garanti Estimates

Our top line forecasts for both 2015 and 2016 are slightly lower than the
Bloomberg consensus numbers as we now expect lower growth following the
unchanged YoY sales performance in Q1, yet we still expect an improvement in
the remaining quarters. As far as EBITDA is concerned, we are also at the lower
end of the consensus due to our more sluggish sales forecasts, and our projection
of more conservative margins in line with the Companys guidance. We believe
most of the market participants have not yet updated the YE forecasts to take
account of the 1Q results, causing the deviation from our results.
Although we have assumed that the plunge in commodity prices is embedded on
the cost front, we expect a negative exchange rate impact, leading to cost
pressure. The deviation at the bottom line, which exceeds the difference at the
operating profitability line, can be put down to differences in exchange rates
projections, leading to a divergence in exchange rate positions given the sharp
depreciation of the TL and, moreover, variations in financial expenses which have
also played a part in the disparity. Our TP is in line with the Bloomberg averages,
despite our lower margin forecasts for the next couple of years and our projection
of a more gradual improvement in profitability.
ULKER
Bloomberg
Garanti Securities
Difference
(TLmn)
2015E
2016E
2015E
2016E
2015E
2016E
Net Sales
3,279
3,713
3,190
3,587
-3%
-3%
EBITDA
409
499
381
457
-7%
-8%
Net Profit
266
332
228
284
-14%
-15%
EBITDA Margin
12.5%
13.4%
12.0%
12.7%
-0.5 pp
-0.7 pp
Net Profit Margin
8.1%
8.9%
7.2%
7.9%
-1 pp
-1.1 pp
Target Share Price
21.25
21.30
0%
Source: Bloomberg, Garanti Securities
10

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Food & Beverages
Ulker Biskuvi
RESEARCH
MAIN ASSUMPTIONS & FORECASTS

Volumes & Revenues
Ulker Biskuvi recorded 4% growth in sales volumes in the cake category, which
constituted 14% of consolidated volumes in 2014, and 3% growth in the biscuits
category, which constituted 55% of total volumes during the year. However, sales
volumes of chocolate, which accounted for 31% of consolidated volumes,
contracted by 6% in 2014. While the Company realized an average 8% price
increase throughout all categories on average, the price increase in the chocolate
category was 10% as the Company faced input cost pressure; this, along with a
drop in export volumes, led to a fall in chocolate sales volumes in 2014. The
increases in raw material costs, which were reflected to prices, negatively affected
the volume figures.
Ulker Biskuvi Volume Breakdown (000 tonnes)
Cake
growth
2013
2014
2015E
2016E
2017E
2018E
65
68
71
75
81
87
15%
4%
5%
6%
8%
8%
159
150
153
162
173
184
growth
19%
-6%
2%
6%
7%
6%
Biscuit
255
263
278
297
315
334
growth
10%
3%
6%
7%
6%
6%
479
481
501
534
569
605
13%
0%
4%
7%
7%
6%
Chocolate
Total
growth
While exports constituted 18% of the consolidated revenues in 2014 (20% in

2013), overall export volumes were down by 7% YoY in 2014 due to the 25% YoY
plunge in Iraq amid turmoil in the region. Moreover in 1Q15, consolidated sales
volumes were down by 7.5% YoY to 120,000 tonnes, again due to a 32% YoY fall
in export volumes (with Iraq and Yemen accounting for most of the decline) to
20,000 tonnes in 1Q, with the share of exports in total revenues standing at 14%.
The main reason behind the contraction in export volumes was the optimization
and integration process at Biskot Gda, which exports approximately 60% of its
production, and also the contraction in PL sales in the domestic market, which
played a part in the drop of overall volumes.
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Food & Beverages
Ulker Biskuvi
RESEARCH
The volume growth of 2.8% in the biscuit category and the volume contraction of
6% in the chocolate category were both below the market growth rates of 5.9%
and 7.4%, respectively, in 2014. As Ulker Biskuvi being the price setter in the
confectionery market, its competitiors product prices follow with a lag, the result
being they are more attractively priced for a period of time. Note that Ulker Biskuvi
is the market leader in both biscuits and chocolates market, being the number 2 in
cake category.
We project a 5% increase in volumes in the cake category in 2015 (down by 7%
YoY in 1Q15), 6% volume growth in the biscuits category (down 2.5% YoY in
1Q15) and 2% volume growth in chocolate category given the 16% contraction in
1Q15. In 2016, however, we expect an improvement in volumes of each category,
projecting 6% growth in the cake category, 7% in the biscuit segment and 6% in
the chocolate segment, leading to 7% growth in consolidated volumes. We expect
the chocolate category to rebound next year following the completion of the
optimization period in Biskot Gda, along with easing currency pressure on the
cost side, leading to price increases in 2014 and 1Q15.
Ulker Biskuvi Revenue Breakdown (TLmn)
Cake
growth
Chocolate
2013
2014
2015E
2016E
2017E
2018E
314
358
398
447
507
572
19%
14%
11%
12%
14%
13%
1,329
1,387
1,507
1,690
1,901
2,105
growth
17%
4%
9%
12%
12%
11%
Biscuit
1,000
1,119
1,258
1,424
1,586
1,757
growth
18%
12%
12%
13%
11%
11%
Other
105
26
26
26
26
26
Total
2,748
2,891
3,190
3,587
4,021
4,461
17%
5%
10%
12%
12%
11%
growth
Despite the fairly slack volume growth projections for 2015, with price increases
expected to keep up with the rate of food inflation, we project 10% consolidated
revenue growth in 2015, exceeding the 5.2% in 2014. In 1Q15, Ulkers top line
growth was flat on a YoY basis due to weak export revenues, price increases and
the downsizing impact with the divestiture of sales companies.
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Ulker Biskuvi
RESEARCH
The share of the chocolate category in total revenues increased from 43% in 2011
to peak at 51.7% in 2012 before falling back to 47.6% in 1Q15, with the decline in
the last couple of quarters being a result of price pressure. The share of biscuits in
total revenues hovers at around 35-40% with a lower price range per kg than in
the chocolate category, despite having a higher share in the quantity base. In
2014, average price hikes amounted to 8% in all categories (10% in the cake
category, 11% in the chocolate category and 8% in biscuits category). We project
an average price hike of 5.8% in 2015, slightly below our average headline
inflation forecast of 6.6% for the year.
Ulker maintained its market share in the biscuits and cake category in 2014, yet
the Company suffered a 2pp market share loss in the chocolate category where its
market share slipped to 46% on the back of the average 11% price hike
throughout the year, as Turkeys volumes grew by 3% in 2014. However, as Ulker
is the price setter, we expect the Company to claw back its lost market share, as
competitors realize price increases with a lag.
Ulker Biskuvi Revenue Growth (TLmn)

8000
10% Revenue CAGR
6000
4000
2000
0
2013
2015E
2017E
Cake
2019E
Chocolate
2021E
2023E
Biscuit
We project that Ulker Biskuvi will record a CAGR of 10% in revenues over the next
decade thanks to retaining its market leader position on the back of product mix
management and price increases in line with the average inflation through new
launches. Moreover, we project further penetration in international operations over
our projection period.
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Food & Beverages
Ulker Biskuvi
RESEARCH
Cost Structure
Raw material costs constitute 65% of Ulkers COGS structure. While cacao is
imported from Ghana and Ivory Coast, palm oil is imported from Malaysia and
Indonesia to Turkey, both in US$ terms; however, wheat and sugar are procured
in the domestic market. The price hikes in the raw material, cacao, were the main
issue in 2014 due to the cacao shortage as a result of the weather and the Ebola
virus. Cacao prices jumped around US$3,3000/tonne in September 2014
(US$3,234/tonne as of 10 June 2015, CCNF Comdty) with the Ebola outbreak in
Ivory coast, the worlds major cacao supplier. Accordingly, margins in the
chocolate category felt the impact from cost pressure, TL weakness against the
US$ and market share loss due to competition from Eti, the second major player in
the Turkish confectionery market.
Breakdown of COGS
Cacao
15%
Other
35%
Palm Oil
15%
Raw
Materials
(65%)
Wheat
20%
Sugar
15%
In 2014, cacao prices increased by 10% YoY in US$ terms, while sugar and wheat
prices increased by around 10% YoY in TL terms and pistachio and nut-puree
prices recorded a surge of above 20% YoY. Palm oil prices peaked at US$2,783/
tonne in May 2014 (US$2,293/tonne as of 10 June 2015, KOU5 Comdty), yet as
procurement is based in US$ terms, the Company was negatively impacted by the
depreciation of the TL on the cost side. There has been a 4% YoY increase in
cacao prices since the Company realized the contracts in September 2014 for the
full year and already purchased its cacao need until September 2015.
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Food & Beverages
Ulker Biskuvi
RESEARCH
MAIN ASSUMPTIONS
Profit Margins
Ulkers gross margin was down by 2pp in 2014 due to raw material cost pressures.
We expect the Companys gross margin to improve by 0.9pp over this year
through the carry on price increases, downsizing impact and product mix
management. The 0.7pp improvement in the gross margin in Q1 to 23.4%
supports our YE expectation. We project an average 22% gross margin in our
projection horizon, marking an increase of 1.2pp in the long run.
EBITDA (TLmn) & EBITDA margin (%)
700
13.1%
11.5%
500
11.5%
12.0%
12.0%
9.4%
300
8.0%
4.3%
100
-100
16.0%
12.7%
4.0%
2011
2012
2013
2014
2015E
EBITDA (TL mn)
2016E
2017E
0.0%
EBITDA margin
The Company recorded 61% CAGR in its EBITDA between 2011 and 2014,
propelling its EBITDA margin up by 7.1pp to 11.5% on the back of the
transformation program that the Company implemented. We project a 0.5pp YoY
improvement in the EBITDA margin to 12% in 2015 (12.3% in Q1, up by 1.2pp
YoY) given the lower G&A expenses and SKU optimization program at Biskot
Gda. 35% of the Companys operating costs are in hard currency; thus the
combination of a weak TL and strong US$ is negative for the Companys operating
performance.
Ulker Biskuvi aims to achieve further margin improvement in the medium term by
enhancing its optimization and efficiency models, paving the way for further
synergies within the business units. Accordingly, we project a 1.6pp improvement
in the EBITDA margin by 2017, taking the margin to over 13%, and expect the
Company to attain EBITDA margins of over 15% during the next decade.
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Ulker Biskuvi
RESEARCH
Capital Expenditures
The Company realized TL96mn of capex in 2014, leading to a 3.3% capex/sales
ratio; accordingly, we forecast capex spending of TL150mn in 2015 and TL108mn
in 2016, corresponding to a capex/sales ratio of 4.6% in 2015 and 3.0% in 2016.
The addition of four new production lines in the domestic market (one for
chocolate, one for biscuits and two for the cake segment) are the reasons behind
our expectation of a higher ratio in 2015E. We project an average capex/sales
ratio of 2.5% throughout our forecast horizon, decreasing from 3.0% to 1.8% in the
long run, in line with the Companys projection that capex would amount to 2.53.0% of net sales.
Working Capital
Ulker recorded a cash cycle of 28 days and WCR to Sales ratio at 11% in 2014
and we project the WCR/sales ratio to stand at around 12% over our forecast
horizon. Receivable and payable days both declined by around 10 days in the last
3 years, to 76days and 82 days in 2014, respectively. Even so, inventory days
improved to 34 days in 2014 over the same period, mainly attributable to the better
management of the supply chain model and distribution channels.
Working Capital (WC) - Cash Conversion Cycle (days)
120
100
80
60
40
20
0
2012
2013
Inventory Days
2014
Receivable Days
2015E
2016E
Payable Days
Source: The Company, Garanti Securities Estimates
We project average payables turnover of 80 days while our model assumes that
the Company has receivable turnover of 79 days and inventory turnover of 35
days over our forecast horizon. The reasonable inventory turnover rates, achieved
through a well bedded supply chain and logistics model, contributes to the reduced
working capital requirement in the business model and enables the Company to
liquidate its investments rapidly.
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Ulker Biskuvi
RESEARCH
Dividend Policy
Ulker distributed a gross cash dividend of TL94mn (TL0.27 per share) from its
2014 earnings, indicating a dividend yield of 1.3% and a pay-out ratio of 44%. The
dividend distribution in 2014 was lower than the 70% pay-out ratio stipulated in the
Companys dividend policy due to the higher capex for 2015 and acquisition of
operations in Saudi Arabia and Egypt. However, the Company has averaged a
68% payout ratio (90% in 2012, 71% in 2013) in the last 3 years. Accordingly, we
project an average 70% payout ratio in line with the Companys guidance, and a
2.9% dividend yield for the 2015-2018 period.
Dividend Payments (TLmn)
400
100%
90%
70%
71%
300
70%
44%
80%
60%
200
40%
100
20%
0%
2012
2013
Dividend
2014
2015E
Net Income
2016E
Payout Ratio
Source: The Company, Garanti Securities Estimates
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Food & Beverages
Ulker Biskuvi
RESEARCH
THE COMPANY
Ulker Biskuvi, formerly Ulker Gda, was established in 1944 and is the flagship of
Yildiz Holding as the pioneer confectionery company in Turkey. Ulker Biskuvi is
engaged in the production of chocolate, chocolate coated biscuits, biscuits and
cakes with 330 SKUs in domestic and international markets. Ulker Biskuvi holds a
92% stake in Ulker Cikolata and 74% of Biskot Biskuvi, and also has a 19% stake
in Godiva Belgium BVBA. 49% of the shares in Ulker Biskuvi are held by Yildiz
Holding, the parent company, with Yildiz Holding subsidiaries and Ulker family
members holding 8% of the shares and 43% of the shares being free float.
Shareholder Structure
Yldz Holding
49%
Free Float
43%
Yldz Holding
Subsidiaries &
Ulker Family
Members
8%
Source: The Company
Ulker Biskuvi has a total of 6 plants, located in Topkap (Istanbul), Hadmkoy

(Istanbul), Silivri (Istanbul), Ankara, Karaman and Gebze (Izmit). The Factory in
Topkapi, Istanbul, established in 1991, produces chocolate with an annual
capacity of 194,000 tonnes and an enclosed area of 68,000 sqm; the Hadimkoy,
stanbul Factory, established in 1992, produces cakes with an annual capacity of
45,000 tonnes and an enclosed area of 27,000 sqm; the Silivri, Istanbul Factory,
established in 1995, produces chocolate and chocolate covered biscuits with an
annual capacity of 30,000 tonnes and an enclosed area of 12,000 sqm; the
Gebze, zmit Factory, established in 1997, produces biscuits and crackers with an
annual capacity of 59,000 tonnes with an enclosed area of 41,000 sqm; the
Ankara Factory, established in 1969, is the largest biscuit production facility in the
Middle East with an annual capacity of 109,000 tonnes on an enclosed area of
86,000 sqm; the Karaman Factory, established in 1986, which is 74% owned by
Ulker, produces biscuits, cakes, crackers and chocolate with an annual capacity of
195,000 tonnes on an enclosed area of 102,000sqm.
18

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Ulker Biskuvi
RESEARCH
Ulker Biskuvi acquired Biskot Biskuvi Gda for TL200mn in March 2014, raising the
Companys share in Biskot Biskuvi to 74%. However, Ulker Biskuvi sold its 91%
stake in Istanbul Gda Ds Ticaret, the trading company, and 79% stake in Birlesik
Gda Ticaret, the trading company, to Yildiz Holding for TL29mn and TL3mn,
respectively, on 6th May 2014. Moreover, Ulker Biskuvis subsidiary, Biskot
Biskuvi Gda, also sold its 100% owned subsidiary, Rekor Gda Pazarlama, the
marketing company, in which Ulker Biskuvi holds a 44% indirect stake, to Yildiz
Holding for TL4mn on May 6th.
Product Categories: Biscuit, Chocolate, Cake
The Main biscuit brands are Potibor, Cizi, Krispi, Mavi Yesil, Hanmeller, Bebe
Bskuvisi, Biskrem, Krim Kraker, Probis, Cokoprens, As Kraker, Basak, Ikram,
Canpare, Rondo, Altnbasak, 9 Kat Tat, Halley, Kat Kat Tat, Cubuk Kraker, Alpella
Ring, Hasat, Bolero, Saklikoy, Dore and Haylayf. The Ankara Plant reached a
CUR of 86%, producing 109,000 tonnes of biscuits and net sales of 103,000
tonnes of biscuits. The Gebze Plant worked to a CUR of 94%, producing 71,000
tonnes of biscuits and realizing net sales of 75,000 tonnes in 2014. Moreover, the
Karaman Plant produced 84,000 tonnes of biscuits, realizing 86,000 tonnes of net
biscuit sales, with a CUR of 65% in 2014.
The main chocolate brands are: Ulker Cikolatal Gofret, Cokokrem, Metro, Albeni,
Cokonat, Dido, Ulker Napoliten, Ulker Smart, Hobby, Smartt, Biruya, Piko, Ece,
Cikolatin, Halk Cokomilk, Caramio and HalkAlpella. The Topkap plant produced
107,000 tonnes of goods and realized net sales of 112,000 tonnes in 2014. In the
Silivri facility, Ulkers subsidiary Biskot produced 23,000 tonnes chocolate and
21,000 tonnes sales, with a CUR of 63%.
The main cake brands are Dankek, Kesktra, Olala, Albeni, Alpella, Halk and
Karsa. The Esenyurt Plant operated at full capacity in 2014, producing 40,000
tonnes of confectionery and realizing 40,000 tonnes of sales. Ulkers subsidiary,
Biskot, produced 28,000 tonnes of goods, all of which were sold in 2014.
Ulkers new launches are Dore ( June 2013) indulgence biscuits, Diet Biscuits
(Sept 2013), Laviva (Sept 2013) new chocolate, O La La (March 2014) a new
cake line, Dido Black (August 2014) a new wafer, Bi Rya (Sept 2014) new
chocolate, Rodeo (Feb 2015) new chocolate, Kup Gofret (Feb 2015) new
biscuits, Riva (March 2015) a new chocolate.
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Ulker Biskuvi
RESEARCH
1Q15 Financial Results

Ulkers top line came in at TL790mn, remaining flat YoY and up by a mere 3%
QoQ on the back of weak export revenues, price increases and the downsizing
impact (divestiture of sales companies). LFL sales growth came in at 5.4% in the
first quarter. In terms of their proportion in sales volumes, biscuits accounted for
56.4% of the total in 1Q15 (compared to 53% in 1Q14), the chocolate category
accounted for 29% (compared to 32% in 1Q14) and the cake category had a 14%
share (unchanged from 1Q14).
The Companys consolidated sales volumes edged down by 7.5% YoY in the
quarter to 120,000 tonnes (with a decrease of 2.5% in biscuit sales volumes, a
16% contraction in chocolate sales volumes and 7% decrease in sales volumes for
cakes). The contraction in sales volumes was mainly attributable to the 32% slump
in export volumes (mainly attributable to the collapse in exports to Iraq and
Yemen) in Q1 to 20,000 tonnes, while the share of exports in total revenues was
14% in 1Q15.
Ulkers gross margin was up by 0.7pp at 23.4% in Q1 thanks to continued price
hikes, the downsizing impact and product mix management. Accordingly, Ulker
recorded TL97mn of EBITDA in 1Q15 (up 10% YoY, flat QoQ), corresponding to a
12.3% EBITDA margin, up by a further 1.2pp YoY but down by 0.3pp QoQ on the
back of lower G&A expenses and SKU optimization program at Biskot Gda.
Ulker posted TL37mn of net income (down 28% YoY and 35% QoQ) in its 1Q15
consolidated financial statements on the back of the TL109mn in financial
expenses given the Companys US$120mn short FX position (1Q15: TL312mn net
debt) as of the end of 1Q15. The net FX loss of TL29mn (TL4mn in 1Q14) in the
quarter dragged the bottom line in the quarter lower given the 12% depreciation of
the TL against US$ in the first quarter.
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Ulker Biskuvi
RESEARCH
1Q15 Financial Results

Ulker Summary Financials
(mn TL)
Change
1Q14
2Q14
3Q14
4Q14
1Q15
Net Sales
792
658
673
768
790
Gross Profit
180
136
125
166
Operating Profit
74
61
59
83
EBITDA
88
75
73
Net Other Income/Expense
-1
Profit (Loss) from Subsidiaries
Financial Inc./ Exp. (net)
-41
Tax
-17
3M15/3M14
0%
3%
185
3%
11%
3%
83
12%
0%
12%
96
97
10%
0%
10%
-2
56%
n.m.
56%
n.m.
n.m.
n.m.
-15
-39
-26
-109
n.m.
n.m.
n.m.
-5
-9
-11
n.m.
n.m.
n.m.
-28%
-35%
-28%
Net Income
51
68
36
56
37
Net Cash
-20
-334
-491
-300
-312
Working Capital
1Q15/1Q14 1Q15/4Q14
0%
387
365
488
305
396
1,199
1,066
1,104
1,230
1,177
Gross Margin
22.7%
20.7%
18.7%
21.7%
23.4%
0.7 pp
1.7 pp
0.7 pp
Operating Margin
9.4%
9.3%
8.7%
10.8%
10.5%
1.1 pp
-0.3 pp
1.1 pp
EBITDA Margin
11.1%
11.3%
10.8%
12.6%
12.3%
1.2 pp
-0.3 pp
1.2 pp
Net Profit Margin
6.5%
10.4%
5.3%
7.4%
4.7%
-1.8 pp
-2.7 pp
-1.8 pp
Shareholders Equity
Ratios
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Ulker Biskuvi
RESEARCH
APPENDIX
Godiva Belgium BVBA Ulker Biskuvis Financial Investment
Ulker Biskuvi holds a 19.23% stake in Godiva Chocolatier Inc, the owner of the
Godiva brand. Godiva is a leading premium chocolate producer with significant
brand equity worldwide. Since its acquisition by Yildiz Holding for US$850mn in
2008, Godiva has sought to enter leading international markets, which include
China, Australia, South Korea, Indonesia, Macau, Saudi Arabia and Turkey. As a
global brand, international sales constitute 52% of the total sales of Godiva
Chocolatier, up from 43% five years ago.
Geographical diversification of Godiva Chololatier
Source: The Company
Available through 10,000 specialty retailers, Godiva owns and operates 444 retail
boutiques, reaching 32,000 points of sale, with a presence in 100 countries as of
the end of 2014. Godiva attained 14% EBITDA growth over the 2013-2014 period,
with 8% growth in revenues, recording a top line of US$732mn. Godiva plans to
open 50 new stores per annum, aiming to reach US$1bn in revenues and
US$120mn EBITDA in 2017.
Godiva has yet to reach its potential in terms of growth and margins by
restructuring the company, investing in store expansion (especially in the Far
East), closing down inefficient stores and reshuffling the product portfolio. The
Company plans to expand its business in under-penetrated markets with high
growth potential.
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Food & Beverages
Ulker Biskuvi
RESEARCH
APPENDIX
Profile of the confectionery markets in Saudi Arabi and Egypt
Saudi Arabia
Saudi Arabia has a population of 30.6mn, which has grown at CAGR of 2.9%
between 2008 and 2014. Its current GDP stands at US $745bn, growing at around
2% per year. The country has a confectionery market of approximately US$2.6bn,
comprising an 8% market share in the biscuit market worldwide, as well as a 1%
market share in the global chocolate market. Its chocolate market, which
amounted to US$1,117mn, has grown at a CAGR of 9.7% in 2008-2014 period,
whereas its biscuit market, worth US$752mn, has recorded around 5.6% growth.
Per capita consumption of chocolate in Saudi Arabia stood at 2.1kg in 2014 with
per capital consumption of 3.7kg of biscuits.
Yildiz Holding operates in Saudi Arabia through FMC which produces biscuits,
chocolate and cakes. FMC has a production capacity of 43,000 tonnes, and
operates with around 100 goods vehicles reaching approximately 10,000 sales
points. Established in 2000, 45% of FMC is owned by a local partner, with Yildiz
Holding holding the remaining 55% stake. FMCs net sales increased from US$
91mn to US$103mn over the course of 2013-2014. Its EBITDA margin in the same
period increased from 6% to 9%.
Egypt
Egypt has a population of 83mn which has grown at a CAGR of 2.0% between
2008-2014. Its current GDP stands at US$ 272bn, growing at around 3% per year.
The country has a confectionery market worth US$ 1.8bn, and makes up less than
1% of the global biscuit market. Meanwhile Egypts chocolate market, which had a
volume of US$408mn, has posted growth of 5.3% per year, while its biscuit
market, amounted to US$869mn, has grown more rapidly with 9.4% growth. Per
capita consumption of chocolate in Egypt stood at 0.4kg in 2014, with per capita
consumption of biscuits standing at 2.9kg.
Yildiz Holding produces in Egypt through Hi Food which produces biscuits. Hi
Food has a production capacity of 27,500 tonnes. Established in 2007, 54% of Hi
Food is owned by a local partner, with the remaining 46% stake owned by Yildiz
Holding. Hi Foods net sales increased from US$ 36mn in 2013 to US$42mn in
2014, while its EBITDA margin decreased from 18% in 2013 to 13% in 2014.
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Food & Beverages
Ulker Biskuvi
RESEARCH
APPENDIX
YILDIZ HOLDING
Ulkers founders, Sabri and Asm Ulker, began baking their first petit beurre
biscuits in Istanbul in 1944. The Company started production in Ankara with
Anadolu Gda in 1970, established as Turkeys first public company. The
companies were consolidated under the Yildiz Holding name in 1989.
In 1992, the company invested in the oil and fats industry via the establishment of
Besler Gda. In 1993, Yildiz partnered with Cerestar Group, the largest starch
producer in Europe, and established the Pendik Niasta Company. lker then
entered the dairy products industry with the opening of the Ak Gda factory and the
launch of the lker im brand in 1996. In 2001, Yildiz acquired a significant stake
in Baycan, the worlds third largest chewing gum producer at the time. After
entering the beverage industry in 2001 with the brand Link, lker acquired the
soda brand amlca in 2002 to reinforce its position in the market. Della Gda
began beverage production within the same year. lker then became partners with
Kelloggs, the worlds largest cereal manufacturer, in 2005.
Yildiz Holding acquired the international premium chocolate brand Godiva, a
division of the Campbell Soup Company, in 2007. Yildiz invested in Unmas,
producer of UNO, Turkeys first packaged bread, and Doruk Unlu Mamulleri, which
runs the bakery chain Komsu Frn. Yildiz then acquired tea companies Dogacay
and Obacay. In 2010, Yildiz signed a partnership agreement with the EckesGranini Group, one of the leading juice producers in Europe, founding a new
company called Yildiz Granini, as well as signing an equal partnership agreement
with the global spice company McCormick to create a new Turkish spice
company called Yildiz McCormick.
In 2011, Yildiz acquired the Italian company Nuroll, one of the largest packaging
companies in Europe. The holding then acquired the Sok retail chain from BC
Partners, Migros main shareholder. In the same year, Yildiz became a partner
with the Swedish paper company, SCA, and the cash & carry company, Bizim
Toptan, went public. Yildiz partnered with the Japanese company, Nissin Foods in
2013, acquired Ayta Et, one of Turkeys largest meat producers, and acquired the
Adapazar Sugar Factory. As the leading food & beverage company in the EMEA,
lker acquired all of the shares in the DeMets Candy Company, a chocolate
confectionery manufacturer with strong distribution channels in the United States.
Yildiz Holding became the worlds third largest biscuit manufacturer through the
acquisition of the British United Biscuits.
24

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see theon
last
page of
this report
for important
disclosures.
June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
Yildiz Holding Companies

Ulker Biskuvi (ULKER.IS)
Yildiz Holdings main brand, which was founded in 1944 and which commands a
50% market share. As the flagship company in the Yildiz Group, lker
manufacturers more than 100 products that are distributed domestically.
Bizim Toptan (BIZIM.IS)
One of the largest cash-and-carry wholesalers in Turkey with wholesale outlets
nationwide, offering consumers an important channel for branded food staples,
non-alcoholic beverages, tobacco products and cleaning and personal care
products.
Makina Takm (MAKTK.IS)
Turkeys largest producer of cutting tools, manufacturing tools for drilling, cutting,
and sawing for the cutting tools sector. The company offers customers a wide
range of over 30,000 different individual products, as well as producing customdesigned products for industry.
FFK - Fon Financial Leasing (FONFK.IS)
FFK, Fon Financial Leasing is a leasing company in Turkey, which leases land
and sea vehicles, machines, fixtures and other fixed assets.
Gozde Venture-Capital Trust (GOZDE.IS)
An investment company that was founded after a portion of FFK Fund Financial
Leasings shares in Trkiye Finans Katlm Bankas and Kaynak Leasing were
spun-off. In March 2011, the Capital Marketing Board (CMB) approved the
companys application to convert into a venture-capital trust.
Kerevitas (KERVT.IS)
The company, which was the first to introduce Turkey to frozen food, was
established in 1969. It is the market leader in the frozen food and canned tuna
segments under the Superfresh main brand.
Saglam REIT, SAF REIT (SAFGYO.IS)
Following the developments in the real estate market in Turkey, Saglam REIT and
Saf REIT merged in 2011 with the aim of creating revenue and providing investors
with a high level return.
25

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2015-06-25
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see theon
last
page of
this report
for important
disclosures.
June 18, 2015

Food & Beverages
Ulker Biskuvi
RESEARCH
APPENDIX
Market Shares in Turkey Confectionery Sector by Company
Biscuit Category
48%
48%
47%
43%
40%
12%
10%
2011
2013
Ulker
Eti
43%
11%
9%
9%
2012
46%
46% 45%
43%
2014
1Q15
Other
Chocolate Category
51%
48%
9%
12%
48%
21%
19%
5%
2011
47%
46%
23%
21%
10%
10%
8%
8%
12%
8%
12%
10%
8%
2012
2013
2014
Ulker
Nestle
Eti
Kraft
Ferrero
19%
15%
8%
9%
1Q15
Other
Cake Category
49%
39%
36%
12%
2011
58%
56%
53%
33%
14%
2012
Ulker
2013
Eti
34%
32%
10%
55%
10%
2014
11%
1Q15
Other
Source: AC Nielsen, Euromonitor
26

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2015-06-25
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see theon
last
page of
this report
for important
disclosures.
RESEARCH
Disclaimer
Definition of Stock Ratings

OUTPERFORM (OP)
The stock's return is expected to exceed the return of the BIST-100 over the next 12 months.
MARKET PERFORM (MP) The stock's return is expected to be in line with the BIST-100 over the next 12 months.
UNDERPERFORM (UP)
The stock's return is expected to fall below the return of the BIST-100 over the next 12 months.
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RESEARCH
Disclaimer
This document and the information, opinions, estimates and recommendations expressed herein,
have been prepared by Garanti Securities Research Department, to provide its customers with
general information regarding the date of issue of the report and are subject to changes without prior
notice. All opinions and estimates included in this report constitute our judgment as of this date and
are subject to change without notice.
This document and its contents do not constitute an offer, invitation or solicitation to purchase or
subscribe to any securities or other instruments, or to undertake or divest investments. Neither shall
this document nor its contents form the basis of any contract, commitment or decision of any kind.
Investor who have access to this document should be aware that the securities, instruments or
investments to which it refers may not be appropriate for them due to their specific investment goals,
financial positions or risk profiles, as these have not been taken into account to prepare this report.
Therefore, investors should make their own investment decisions considering the said circumstances
and obtaining such specialized advice as may be necessary. The information in this report has been
obtained by Garanti Securities Research Department from sources believed to be reliable. However,
Garanti Securities cannot guarantee the accuracy, adequacy, or completeness of such information,
and cannot be responsible for the results of investment decisions made on account of this report.
The market prices of securities or instruments or the results of investments could fluctuate against
the interests of investors. Investors should be aware that they could even face a loss of their
investment. Transactions in futures, options and securities or high-yield securities can involve high
risks and are not appropriate for every investor. Indeed, in the case of some investments, the
potential losses may exceed the amount of initial investment and, in such circumstances, investors
may be required to pay more money to support those losses. Thus, before undertaking any
transaction with these instruments, investors should be aware of their operation, as well as the rights,
liabilities and risks implied by the same and the underlying stocks. Investors should also be aware
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Garanti Securities
Etiler Mah. Tepecik Yolu
Demirkent Sokak No:1
34337 Besiktas, Istanbul / Turkey
Phone: +90 (212) 384-1155
Fax: +90 (212) 352-4240
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June 18 2015

Turkey - Equity - Food & Beverages

Current Mcap (TLmn)

Current Mcap (US$mn)

Price Performance (TL)

years from an operational and corporate governance perspective

with its efforts to enhance transparency and efficiency. We expect

a CAGR of 12% in revenues and 17% in EBITDA over next 3

years, with the Company preserving its domination of the market.

prospects. Ulker Biskuvi has evolved successfully in the last 3

Astute maneuvers on corporate strategy with bullish mid-term

Ulker Biskuvi to benefit from the stabilization in commodity

12M Target Price TL

course to post a CAGR of 12% in revenues and 17% in EBITDA

As a pioneer in the confectionery business, Ulker Biskuvi is on

recommendation and a 12 month price target of TL21.30

We initiate our coverage for Ulker Biskuvi with an OP

management and improved operational efficiencies. We expect

Stock Market Data

Saudi Arabia and Egypt operations to unlock value by 2H15. The

52 Week Range (TL):

acquisition of a 55% stake in a facility in Saudi Arabia and 46%

Average Daily Vol (US$mn) 3 mth:

stake of a facility in Egypt will be finalized in 2015. Double digit

top line growth is expected in Saudi Arabia; however, no growth is

Shares Outstanding (mn):

projected in Egypt, given the c.20% devaluation of the Egyptian

Free Float (%):

pound. Although acquisitions will contribute to revenues, they will

Foreign Ow nership in Free Float (%):

be slightly dilutive on profitability margins in the short-term.

Research Analyst: Irem Okutgen

Financials and Ratios

Net Sales (TLmn)

Net Income (TLmn)

+90 (212) 384 1155-58

+90 (212) 384 1135

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June 18, 2015

Income Statement (TLmn)

Gross Profit (Loss)

Profit (Loss) before Tax

Net financial Income/ Expense

Balance Sheet (TLmn)

Short Term Trade Receivables

Other Current Assets

Long Term Assets

Short Term Liabilities

Short Term Financial Loans

Short Term Trade Payables

Other Short Term Liabilities

Long Term Financial Loans

Other Long Term Liabilities

T. Liabilities & S.holders Equity

Cash and Cash Equivalents

Long Term Liabilities

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June 18, 2015

A carefully crafted corporate strategy and upbeat mid-term