Turkish Consumer Research Analysts SECTOR FORECAST Onur Muminoglu 90 212 349 0454 [email protected] Forecasting a Brighter Outlook

Turkish Consumer Research Analysts SECTOR FORECAST Onur Muminoglu 90 212 349 0454 Onur.Muminoglu@Credit-Suisse.Com Forecasting a Brighter Outlook

15 October 2012 EEMEA / Turkey Equity Research Beer & Alcoholic Beverages / Soft Drinks / Automobile Manufacturers / Household Durables (Emerging EMEA)

Turkish Consumer Research Analysts SECTOR FORECAST Onur Muminoglu 90 212 349 0454 [email protected] Forecasting a brighter outlook

■ Increasing target prices by 20% on average: We expect a sequential improvement in Turkish consumer spending in Q4 after a gradual slowdown earlier this year. We are increasing the TPs for most of the consumer stocks in our coverage to reflect our lower risk-free rate assumptions and higher peer multiples. We also upgrade Koc Holding to Outperform from Neutral and downgrade Efes to Underperform from Outperform. ■ Cyclical space looking more attractive: 1) We expect a more favourable monetary environment in the next few months, but 2) even if market interest rates remain unchanged, we think consumer loan rates could come down (Figure 11), while 3) bank deposits—the key savings vehicle for Turkish consumers—offer less incentives to save (Figure 11); also, 4) cyclicals under our coverage have higher pay-outs while interest rates are low, 5) cyclicals look cheaper given the market’s risk appetite (Figure 12), and 6) they have stronger Euro-zone exposure, where Credit Suisse’s Economics Team has recently become slightly more positive. ■ Catalysts: Recent tax hikes on consumer goods appear to have been aimed mainly at raising Treasury revenues rather than curbing Turkey’s current account deficit. However, we think policymakers will avoid risking any further weakness in economic activity. ■ Stock calls—upgrade Koc Holding to Outperform, downgrade Efes to Underperform; Tofas and Arcelik still our top picks: We upgrade Koc mainly due to its attractive NAV discount (new TP of TRY9.10 vs TRY6.81) and downgrade Efes primarily on valuation grounds (new TP of TRY27.00 vs TRY29.90). Tofas and Arcelik remain our top picks in the Turkish consumer space; together they make up c.20% of our SoTP for Koc. Figure 1: Turkish Consumers—Credit Suisse ratings, target prices and valuation estimates in TRY, unless otherwise stated Revised Previous Revised Previous Current Upside 2012E 2013E CS Rating CS Rating TP TP Share Price Potential Adj P/E Adj P/E AEFES UNDERPERFORM OUTPERFORM 27.00 29.90 27.20 -1% 24.4x 19.6x CCOLA NEUTRAL NEUTRAL 37.20 25.70 33.90 10% 24.6x 19.6x BIMAS NEUTRAL NEUTRAL 76.90 70.80 73.00 5% 32.9x 25.2x MGROS OUTPERFORM OUTPERFORM 23.75 21.75 19.25 23% 56.9x 33.6x ARCLK OUTPERFORM OUTPERFORM 12.50 9.70 9.92 26% 11.2x 10.1x TOASO OUTPERFORM OUTPERFORM 11.35 8.65 8.92 27% 8.5x 8.9x FROTO NEUTRAL NEUTRAL 18.95 17.25 18.30 4% 12.2x 11.2x KCHOL OUTPERFORM NEUTRAL 9.10 6.81 7.30 25% 8.8x 8.2x Source: Thomson Reuters, Credit Suisse estimates

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15 October 2012 Table of contents

Key charts 3 Investment summary 4 Cyclical space looking more attractive 5 Valuation vs. the Turkish market 9 Anadolu Efes (AEFES.IS): Beer looking expensive 11 Financial assumptions 14 Coca Cola Icecek (CCOLA.IS): ASP growth driving margins 17 Financial assumptions 19 BIM (BIMAS.IS): Expect a partial recovery from weak 2Q12 23 Financial assumptions 25 Migros (MGROS.IS): Fundamentals more resilient than discounters 28 Financial assumptions 30 Arcelik (ARCLK.IS): Impressive international execution 33 Financial assumptions 35 Tofas (TOASO.IS): Finally paying high dividends? 39 Financial assumptions 41 Ford Otosan (FROTO.IS): 2013E comes with risks and opportunities 44 Financial assumptions 46 Koc Holding (KCHOL.IS): Attractive portfolio at a discount 50

Turkish Consumer 2 15 October 2012 Key charts

Figure 2: The fall in market interest rates not yet reflected Figure 3: Dividend yields on consensus estimates in loan rates FY12E Annualised loan/deposit rates versus bond yields (%)

9.0% Defensives Cyclicals 22% 8.0% 20% 7.0% Consensus 18% 6.0% 16% 5.0%

14% 4.0%

12% 3.0%

10% 2.0%

8% 1.0% 0.0% 6% AEFES.IS CCOLA.IS BIMAS.IS MGROS.IS TOASO.IS FROTO.IS ARCLK.IS Aug-10 Feb-11 Aug-11 Feb-12 Aug-12

GPCL Auto Mortgage Commercial Benchmark bond Deposit Source: CBT, Credit Suisse estimates for August 2012 deposit rates Source: Thomson Reuters

Figure 4: 12M forward consensus P/E of cyclicals relative Figure 5: Western Europe: Major appliances market share to defensives Units, % Credit Suisse covered stocks

70% 75,000 70 65% 60 60% 63,000

55% 50 50% 51,000 40 45% 8.9 9.7 8.8 8.1 8.0 8.2 8.4 40% 39,000 30 35% 20 30% 27,000

25% 10 20% 15,000 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 0 2005 2006 2007 2008 2009 2010 2011 12M-fwd P/E: Cyclicals / Defensives XU100 BSH Bosch & Siemens Hausgerate Electrolux Arcelik Indesit Whirlpool Source: Credit Suisse estimates, Thomson Reuters Source: Euromonitor

Figure 6: Efes: 12M fwd consensus P/E premium has Figure 7: Koc Holding – Discount to NAV increased despite positive market sentiment % unless otherwise stated 100% 15.0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Jun-09 Jul-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 14.0 10% 80% 5% 13.0 0%

60% -5%

12.0 -10%

40% -15% 11.0 -20% 20% 10.0 -25% -30%

0% 9.0 -35% Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 -40% AEFES: P/E premium to Turkish eq 2-yr avg Turkey avg P/E KCHOL NAV premium annual avg Source: Company data Source: Credit Suisse research, Thomson Reuters

Turkish Consumer 3 15 October 2012 Investment summary

■ Upgrade Koc Holding to Outperform: We estimate the holding company shares are currently trading at a 15% NAV discount to its underlying assets, which is close to the lower-end of the consistent tight range of (-4% to -16%) since early 2011. The holding company has underperformed almost all of its major five underlyings in the last 3 months except Tupras, which has a strong 3Q12E earnings catalyst ahead, in our opinion. The (inverse) correlation with the relative stock price and benchmark interest rates has broken lately despite some inorganic growth catalysts on the agenda. In addition to the potential for a narrowing in the NAV discount to its subsidiaries, we see significant potential upside in key NAV constituents. The largest NAV contributor, Yapi Kredi Bank (YKB), is our top-pick among Turkish banks and Credit Suisse analyst Ates Buldur estimates YKB will record the highest earnings growth (17%) among large cap Turkish banks in 2013 (Turkish Banks - What's next?, dated 9/10/2012).

■ Downgrade Efes to Underperform: 1) The market-implied FY12E EV/EBITDA of the beer segment is now trading above the YTD average. 2) Efes’ consensus P/E premium has actually increased during the market rally, contrary to its defensive track record. 3) While 2013E margins will see a significant contribution from the targeted synergies in the international beer division and the recent price hike in Turkey, we remain cautious about beer-volume growth given price hikes, a strong base effect in Turkish-beer (4Q12E) and additional regulations in the Russian beer market effective in January 2013. 4) Efes’ distant competitor in the duopolistic Turkish beer market, TBORG.IS, has become more aggressive in promoting its “Tuborg-Gold” product, which is also evident from the pick-up in its S&M expenses that supported a +40% yoy revenue yoy in 1H12A (versus c.20% by Efes-Turkey). TBORG.IS’ 12M trailing net income turned positive in 2Q12A.

■ Tofas and Arcelik remain our top picks, which together make up c.20% of our SoTP estimate for Koc Holding. 1) We see Arcelik’s consistently improving market share in Europe and strong revenue growth in 1H12A (c.39% yoy, despite a tough base) as one of the most attractive growth stories among all Turkish consumers this year. 2) Interim appreciation in the EURUS$ generally supports its short-term margins (Figure 20). 3) Inorganic growth options remain intact, in our view. 4) Peer valuations and the recent increase in YKB’s share price have helped Arcelik’s valuation (Arcelik’s stake in YKB equals 9% of Arcelik’s MCAP). For Tofas, our key investment theme is dividend expectations. The stock has also been higher beta compared to other major Turkish cyclicals despite the downside EBITDA protection from its take-or-pay export contracts. We expect a more resilient share performance on the back of 1) the likely start of high pay-outs next year (from FY12E earnings), 2) further diversification of the export mix, and 3) the easing capex outlook. Figure 8: Turkish Consumers - Credit Suisse ratings, target price and valuation estimates in TRY, unless otherwise stated Revised Previous Revised Previous Current Upside 2012E 2013E CS Rating CS Rating TP TP Share Price Potential Adj P/E Adj P/E AEFES UNDERPERFORM OUTPERFORM 27.00 29.90 27.20 -1% 24.4x 19.6x CCOLA NEUTRAL NEUTRAL 37.20 25.70 33.90 10% 24.6x 19.6x BIMAS NEUTRAL NEUTRAL 76.90 70.80 73.00 5% 32.9x 25.2x MGROS OUTPERFORM OUTPERFORM 23.75 21.75 19.25 23% 56.9x 33.6x ARCLK OUTPERFORM OUTPERFORM 12.50 9.70 9.92 26% 11.2x 10.1x TOASO OUTPERFORM OUTPERFORM 11.35 8.65 8.92 27% 8.5x 8.9x FROTO NEUTRAL NEUTRAL 18.95 17.25 18.30 4% 12.2x 11.2x KCHOL OUTPERFORM NEUTRAL 9.10 6.81 7.30 25% 8.8x 8.2x Source: Thomson Reuters, Credit Suisse estimates

Turkish Consumer 4 15 October 2012

The key change in our TP methodology in this report is that we are lowering our risk-free rate assumptions from 10.25% to 9% (in nominal TRY) for our coverage universe. We also incorporate higher multiples for the stocks where we use peer multiples in our blended valuations (Arcelik, Tofas, Ford Otosan, Migros). For Koc Holding, we mark-to-market our new TPs for the key underlying stocks in our SoTP (Tofas, Ford Otosan, Arcelik and Yapi Kredi Bank). Koc’s listed subsidiaries and free cash at the holding level make up c.90% of the holding’s market capitalisation. Cyclical space looking more attractive

■ We expect a more favourable monetary environment ahead: Early indicators for the Turkish consumer have been sequentially weak since end-1Q12A, though we attribute part of the weakness to the strong base effect in 1H11A, followed by Ramadan moving into July this year.

■ Although the recent tax increase on some consumer goods creates an inflationary risk against the expected monetary easing in 4Q12E, we believe policymakers will not tolerate further weakness in economic activity. Contrary to some earlier cases, the latest tax hikes appear to have been aimed mainly at improving the Treasury’s revenues rather than curbing the current account deficit. To maintain the same level of tax revenues, domestic economic activity will need to remain intact, too.

Figure 9: Turkey - Consumer loan growth Figure 10: Turkey - Credit card spend (yoy) 30.0 20%

25.0 15%

20.0 10% Aug 15.0 5% 10.0 0% 5.0 -5% 0.0 -10% -5.0 -15% Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Jan-09 Jan-10 Jan-11 Jan-12 6-Jul-12 6-Jan-12 8-Jun-12 3-Feb-12 2-Mar-12 3-Aug-12 20-Jul-12 13-Apr-12 27-Apr-12 20-Jan-12 22-Jun-12 17-Feb-12 16-Mar-12 30-Mar-12 17-Aug-12 31-Aug-12 14-Sep-12 28-Sep-12 11-May-12 25-May-12 Credit card transactions in Turkey (real, TRY m) Spend per card (real, TRY) Consumer loans (annualised, 4-week moving avg, % week-on-week) Consumer loans (annualised, 13-week moving avg, % week-on-week)

Source: Turkish Central Bank, Credit Suisse research Source: Turkish Interbank Credit Card Centre, Credit Suisse research

■ Consumer may see lower funding costs anyway: Turkish banks’ consumer loan rates have not yet followed the sharp decline in the market interest yields as of late. Even if policymakers leave the monetary environment unchanged, we think there is room for a decline in consumer loan rates as well.

Turkish Consumer 5 15 October 2012

Figure 11: The fall in market interest rates not yet reflected in the loan rates Annualised loan/deposit rates versus bond yields

22%

20%

18%

16%

14%

12%

10%

6% Aug-10 Feb-11 Aug-11 Feb-12 Aug-12

GPCL Auto Mortgage Commercial Benchmark bond Deposit

*GPCL: General Purpose Loans; Source: Turkish Central Bank, CS estimates for August 2012 deposit rates

■ Low deposit rates incentivising discretionary spending: Time-deposits continue to be a key investment tool for Turkish consumers. Average deposit rates offered by Turkish banks have tracked the declining market interest rates (Figure 11) and should create a positive substitution effect into discretionary spending.

■ Current low interest rates favouring high pay-out names: Within major Turkish consumer companies under our coverage, cyclicals have stronger dividend-yield outlooks than defensives.

Figure 12: Dividend yields on consensus estimates Figure 13: Dividend yields on Credit Suisse estimates FY12E FY12E 9.0% 12.0% 8.0% Consensus CSe 10.0% 7.0% 6.0% 8.0% 5.0% 6.0% 4.0% 3.0% 4.0% 2.0% 2.0% 1.0% 0.0% 0.0% AEFES.IS CCOLA.IS BIMAS.IS MGROS.IS TOASO.IS FROTO.IS ARCLK.IS AEFES.IS CCOLA.IS BIMAS.IS MGROS.IS TOASO.IS FROTO.IS ARCLK.IS

Source: Thomson Reuters Source: Credit Suisse estimates

■ Relative valuation: The 12M forward consensus P/E of Turkish consumer cyclicals is relatively cheaper to defensives, adjusted for the market’s risk appetite.

Turkish Consumer 6 15 October 2012

Figure 14: 12M forward consensus P/E of cyclicals relative to defensives Credit Suisse covered stocks

70% 75,000 65% 60% 63,000 55% 50% 51,000 45% 40% 39,000 35% 30% 27,000 25% 20% 15,000 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12

12M-fwd P/E: Cyclicals / Defensives XU100

Source: Thomson Reuters, Credit Suisse research

■ Cyclicals to better capture potential recovery in Europe: The latest PMI surveys have not yet shown signs of recovery; however, Credit Suisse’s Economics Team believes that the recent policy announcements from the ECB can help the euro area to gradually pull out of recession (European Economics - Turning German, 21/09/2012). The team has recently upgraded its GDP growth forecasts for the Euro zone by 20bps to 0.7% in 2013, noting that much of the improvement is likely to be realised in the second half of next year (European Economics Quarterly - 28/09/2012). Turkish consumer staples have little exposure to the Euro area, but our cyclical exporters have a high share of business linked to the European economy (Figure 17 - Figure 19).

Figure 15: Euro area PMI Figure 16: EURUS$ and Turkey’s commercial vehicle exports

65 1.70 600,000 monthly avg EURUS$ 60 Turkey's commercial vehicle exports (3-mo MA) 550,000 1.60 55 500,000 450,000 50 1.50 400,000 45 1.40 350,000 40 300,000 35 1.30 250,000 30 200,000 1.20 25 1-Jan-07 1-May-07 1-Sep-07 1-Jan-08 1-May-08 1-Sep-08 1-Jan-09 1-May-09 1-Sep-09 1-Jan-10 1-May-10 1-Sep-10 1-Jan-11 1-May-11 1-Sep-11 1-Jan-12 1-May-12 1-Sep-12 150,000 1.10 100,000 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12

Source: the BLOOMBERG PROFESSIONAL™ service Source: Turkish Central Bank, OSD

Turkish Consumer 7 15 October 2012

Figure 17: Arcelik revenue mix (1H12) Figure 18: Tofas sales mix (1H12) Figure 19: FROTO sales mix (1H12) Middle East Other Others 5% 3% 4% South America 5% Eastern Europe Other Turkey Africa 3% 31% Turkey W.Europe 9% 9% CIS&Eastern Turkey Other European 39% Scandinavia Europe 44% 15% 3% 11% Russia 4% France UK 5% 5%

Western Europe 30% Germany 6% UK France 15% N. America 10% Germany 18% 9% Italy Other 15% 2%

Source: Company data Source: Company data Source: Company data

Among European-exposed cyclicals, Arcelik has the strongest correlation with its (deseasonalised) gross margins and the EURUS$. The reason why Tofas’ margins moved contra-EURUS$ in some intervals was due to the company’s take-or-pay export contracts, whereby its pay compensation (usually higher when the European economy is weak) yields the same absolute gross profit at lower revenues.

Figure 20: Arcelik: EURUS$ and gross Figure 21: Tofas: EURUS$ and gross Figure 22: FROTO: EURUS$ and gross margin deviation from quarterly mean margin deviation from quarterly mean margin deviation from quarterly mean 1.6000 8.0% 1.6000 4.0% 1.6000 6.0% 6.0% 3.0% 1.5000 1.5000 1.5000 4.0% 4.0% 2.0% 1.0% 2.0% 1.4000 2.0% 1.4000 1.4000 0.0% 0.0% 0.0% 1.3000 1.3000 -1.0% 1.3000 -2.0% -2.0% -2.0% 1.2000 1.2000 1.2000 -4.0% -3.0% -4.0% EURUS$ Gross margin deviation EURUS$ Gross margin deviation EURUS$ Gross margin deviation 1.1000 -6.0% 1.1000 -4.0% 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 1.1000 -6.0% 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12

Source: Company data, CBT Source: Company data, CBT Source: Company data, CBT

Turkish Consumer 8 15 October 2012 Valuation vs. the Turkish market

Figure 23: Efes: Consensus 12M forward P/E premium to Figure 24: Coca Cola Icecek: Consensus 12M forward P/E Turkish equities premium to Turkish equities

100% 15.0 140% 15.0

14.0 120% 80% 14.0 100% 13.0 13.0 60% 80% 12.0 12.0 40% 60% 11.0 11.0 40% 20% 10.0 20% 10.0

0% 9.0 0% 9.0 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 AEFES: P/E premium to Turkish eq 2-yr avg Turkey avg P/E CCOLA: P/E premium to Turkish eq 2-yr avg Turkey avg P/E Source: Thomson Reuters Source: Thomson Reuters

Figure 25: BIM: Consensus 12M forward P/E premium to Figure 26: Migros: Consensus 12M forward P/E premium Turkish equities to Turkish equities

200% 15.0 0% 15.0 -5% 14.0 14.0 175% -10% 13.0 13.0 -15% 150% 12.0 -20% 12.0 125% -25% 11.0 11.0 -30% 100% 10.0 10.0 -35%

75% 9.0 -40% 9.0 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 BIMAS: P/E premium to Turkish eq 2-yr avg Turkey avg P/E MGROS: P/E premium to Turkish eq 2-yr avg Turkey avg P/E Source: Thomson Reuters Source: Thomson Reuters

Figure 27: Tofas: Consensus 12M forward P/E premium to Figure 28: FROTO: Consensus 12M forward P/E premium Turkish equities to Turkish equities

0% 15.0 0% 15.0 -5% -5% 14.0 14.0 -10% -10% 13.0 13.0 -15% -15% -20% 12.0 -20% 12.0 -25% -25% 11.0 11.0 -30% -30% 10.0 10.0 -35% -35% -40% 9.0 -40% 9.0 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12

FROTO: P/E premium to Turkish eq 2-yr avg Turkey avg P/E TOASO: P/E premium to Turkish eq 2-yr avg Turkey avg P/E Source: Thomson Reuters Source: Thomson Reuters

Turkish Consumer 9 15 October 2012

Figure 29: Arcelik: Consensus 12M forward P/E premium to Turkish equities

0% 15.0

-10% 14.0 13.0 -20% 12.0 -30% 11.0

-40% 10.0

-50% 9.0 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12

ARCLK: P/E premium to Turkish eq 2-yr avg Turkey avg P/E

Source: Thomson Reuters

Turkish Consumer 10 15 October 2012

Europe / Turkey Beer & Alcoholic Beverages

Anadolu Efes (AEFES.IS) Rating (from Outperform) UNDERPERFORM* DOWNGRADE RATING Price (10 Oct 12, TRY) 27.20 Target price (TRY) (from 29.90) 27.00¹ Market cap. (TRY m) 16,105.26 Beer looking expensive Enterprise value (TRY m) 17,053.0 ■ We reduce our SOTP-based TP to TRY27.00 from TRY29.90 primarily on *Stock ratings are relative to the relevant country benchmark. lower volume estimates for Turkish beer after the recent tax increase ¹Target price is for 12 months. and lower target multiples for international beer. We downgrade our Research Analysts rating from Outperform to Underperform. Onur Muminoglu ■ 90 212 349 0454 The beer segment getting more expensive: The market-implied FY12E [email protected] EV/EBITDA of the beer segment is now trading above the YTD average (Figure 30). Contrary to the stock’s defensive track record, Efes’ consensus P/E premium has actually risen during the market rally (Figure 31). ■ Margin (+); volume (-): 2013E margin will likely see contribution from the targeted synergies in international beer (c.3% of FY14E group sales). Plus, Efes’ recent price hike in Turkish beer implies an 8% net average selling price (ASP) increase (Figure 35). However, we remain cautious about the beer volume growth outlook given 1) recent price hikes (including Russia), 2) the strong base in Turkish beer in 4Q12E, and 3) additional regulations in the Russian beer market effective January 2013. ■ Turnaround in the domestic competitor lately: TBORG.IS, Efes’ distant competitor in the duopolistic Turkish beer market, has recently become more aggressive in promoting its “Tuborg-Gold” product, which is also evident from the pick-up in its S&M expenses (Figure 33). The parent of TBORG.IS injected TRY225m of fresh capital in June-2012. TBORG.IS’ revenues were up 40% yoy in 1H12A (excluding exports), implying a value-share gain (Figure 32). Its 12M trailing net income turned positive in 2Q (Figure 33). ■ Catalysts: 1) 3Q12E IFRS results in early November, 2) new excise tax regime in Turkey will start in January 2013; which will likely result in inflation- parallel tax hikes every 6 months. ■ Valuation: 12M forward consensus P/E is at a 76% premium to Turkish equities versus the most recent two-year average of 50%.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 34 Revenue (TRY m) 4,761.3 6,475.3 7,149.9 7,807.5 29 EBITDA (TRY m) 939.71 1,332.99 1,598.91 1,769.30 24 Adjusted Net Income (TRY m) 439.6 660.8 819.7 932.3 CS adj. EPS (TRY) 0.98 1.12 1.38 1.57 19 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — — 1.46 1.64 Price Price relative ROIC (%) 10.54 14.94 18.01 19.16 P/E (adj., x) 27.84 24.37 19.65 17.28 The price relative chart measures performance against the IST P/E rel. (%) 207.1 212.7 191.5 189.3 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 18.4 12.8 10.6 9.6 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 0.67 IC (12/12E, TRY m) 4,594.52

Performance Over 1M 3M 12M Dividend yield (%) 2.5 EV/IC 3.7 Absolute (%) 2.3 15.7 33.0 Net debt (12/12E, TRY m) 947.7 Current WACC 13.2 Relative (%) 0.7 5.3 16.6 Net debt/equity (12/12E, %) 26.0 Free float (%) 33.0 BV/share (12/12E, TRY) 6.1 Number of shares (m) 592.11 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 11 15 October 2012

Anadolu Efes AEFES.IS Price (10 Oct 12): TRY27.20, Rating: (from Outperform) UNDERPERFORM, Target Price: TRY(from 29.90) 27.00 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 4,761 6,475 7,150 7,807 No. of shares (wtd avg) 450 592 592 592 EBITDA 940 1,333 1,599 1,769 CS adj. EPS (TRY) 0.98 1.12 1.38 1.57 Depr. & amort. (336) (456) (476) (505) Prev. EPS (TRY) — — 1.46 1.64 EBIT (CS) 604 877 1,123 1,264 Dividend (TRY) 0.45 0.67 0.83 0.83 Net interest exp. (133) 10 (35) (43) Dividend payout ratio 46.06 60.01 59.80 52.58 Associates (7) (8) (8) (8) Free cash flow per share 0.25 0.93 0.97 1.14 Other adj, (17) (35) (35) (33) PBT (CS) 447 845 1,044 1,180 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (106) (184) (227) (257) valuation Profit after tax 341 661 817 923 Growth(%) Minorities — — — — Sales 14.2 36.0 10.4 9.2 Preferred dividends — — — — EBIT (14.1) 45.2 28.0 12.6 Associates & other 98 (0) 3 9 Net profit (11.7) 50.3 24.1 13.7 Net profit (CS) 440 661 820 932 EPS (11.7) 14.2 24.1 13.7 Other NPAT adjustments (98) 0 (3) (9) Margins (%) Reported net income 341 661 817 923 EBITDA margin 19.7 20.6 22.4 22.7 EBIT margin 12.7 13.5 15.7 16.2 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 9.4 13.0 14.6 15.1 EBIT 604 877 1,123 1,264 Net margin 9.2 10.2 11.5 11.9 Net interest (133) 10 (35) (43) Valuation metrics (x) Cash taxes paid — — — — EV/sales 3.6 2.6 2.4 2.2 Change in working capital (135) (316) (113) (111) EV/EBITDA 18.4 12.8 10.6 9.6 Other cash & non-cash items 329 594 212 221 EV/EBIT 28.6 19.4 15.1 13.4 Cash flow from operations 664 1,166 1,187 1,332 P/E 27.8 24.4 19.6 17.3 CAPEX (553) (613) (612) (654) P/B 3.9 4.5 4.1 3.8 Free cash flow to the firm 111 552 574 678 Asset turnover 0.7 0.9 1.0 1.1 Acquisitions — (90) — — ROE analysis (%) Divestments 19 — — — ROE stated-return on 11.5 19.6 21.7 22.5 Other investment/(outflows) (5) — — — ROIC 10.5 14.9 18.0 19.2 Cash flow from investments (540) (704) (612) (654) Interest burden 0.74 0.96 0.93 0.93 Net share issue/(repurchase) 0.002 — — — Tax rate 23.6 21.8 21.8 21.8 Dividends paid (247) (221) (462) (586) Financial leverage 0.67 0.58 0.47 0.39 Issuance (retirement) of debt (10) (31) (200) (200) Credit ratios (%) Other (352) 52 200 200 Net debt/equity 36.5 26.0 21.9 19.0 Cash flow from financing (609) (199) (462) (586) Net debt/EBITDA 1.2 0.7 0.5 0.5 Effect of exchange rates 95 (40) (40) (40) Interest coverage ratio 4.5 (85.0) 31.7 29.2 Changes in Net Cash/Debt (389) 223 73 51 . Net debt at start 781 1,170 948 875 Source: Company data, Thomson Reuters, Credit Change in net debt 389 (223) (73) (51) Suisse estimates. Net debt at end 1,170 948 875 824

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets 34 Cash and cash equivalents 918 1,110 982 834 Accounts receivable 579 787 869 949 29 Inventory 561 764 843 921 24 Other current assets 286 150 305 454 19 Total current assets 2,343 2,810 3,000 3,157 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 2,510 2,668 2,804 2,953 Price Price relative Intangible assets and goodwill 1,360 1,250 1,140 1,030 Investment securities — — — — Other assets 208 208 208 208 The price relative chart measures performance against the Total assets 6,421 6,935 7,151 7,347 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 317 411 459 506 Short-term debt 796 780 680 580 Other short term liabilities 516 516 516 516 Total current liabilities 1,629 1,707 1,656 1,602 Long-term debt 1,304 1,288 1,188 1,088 Other liabilities 281 293 305 318 Total liabilities 3,214 3,289 3,149 3,008 Shareholders' equity 3,144 3,584 3,939 4,275 Minority interest 63 63 63 63 Total equity & liabilities 6,421 6,935 7,151 7,347 Net debt (TRY m) 1,170 948 875 824

Turkish Consumer 12 15 October 2012

Figure 30: Market-implied EV/EBITDA for Efes’ beer Figure 31: Efes: 12M forward consensus P/E premium to division (AEFES – CCOLA) Turkish equities has appreciated during the market rally FY12E %, unless otherwise stated 13.0x 100% 15.0 12.5x 1.15 12.2x 14.0 12.0x 80% 1.05 11.5x 13.0 60% 11.0x 0.95 10.5x 12.0 0.85 40% 10.0x 11.0 9.5x 0.75 20% 9.0x 10.0 8.5x 0.65 Jan-12 Mar-12 May-12 Jul-12 Sep-12 0% 9.0 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Mkt Implied FY12E EV/ EBITDA for Efes' beer divisions Avg beer EV/EBITDA AEFES: P/E premium to Turkish eq 2-yr avg Turkey avg P/E AEFES/CCOLA rel sh price Source: Thomson Reuters, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 32: TBORG.IS – Revenue growth in Turkish beer Figure 33: TBORG.IS – 12M trailing S&M spend and net operations income TRY, yoy in 1H12A in TRY millions 45% 4 110 40% 2

35% 0 90 30% -2 -4 25% 70 -6 20% -8 15% -10 50 10% -12 5% -14 30 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Efes - Turkish beer TBORG.IS - Turkish beer Net income S&M expenses (rhs)

Source: Company data Source: Company data

Turkish Consumer 13 15 October 2012

Financial assumptions

Figure 34: Efes – Guidance revision post-2Q results and the implied FY12E EBITDA from divisional guidance in TRY millions, unless otherwise stated before 2Q results (8-May) after 2Q results (29-Aug) Actual Previous Revised Assume Implied by CS est Consensus 2011 FY12E Guidance FY12E Guidance yoy Guidance 2012E yoy 2012E Volumes (mn lt) 4,479 5,372 5,302 Turkish-beer 841 low-single digit growth low-single digit growth 2% 858 856 2% International-beer 1,463 high +40%'s (low-single organic) over +40%'s (flat, organic) 42% 2,077 2,022 38% 50% of Coca Cola Icecek 2,175 low-double digit growth (consolidated) low-double digit growth (consolidated) 12% 2,436 2,423 11%

Revenues (TRYm) 4,761 6,643 6,475 6,543 Turkish-beer 1,391 to grow mid-teens to grow mid-teens 15% 1,599 1,624 17% International-beer 1,622 >70% (mid-single, org) (+7.5% US$TRY) ~70% (low-single, org) (+6% US$TRY) 80% 2,922 2,751 70% 50% of Coca Cola Icecek 1,715 ahead of vols ahead of vols (1H ASP strong +11%) 23% 2,112 2,090 22% Adjustment line 34 10 <<--- 10

EBITDA margin 19.7% 20.6% 20.6% 21.3% Turkish-beer 37.4% Slightly lower yoy but at high-30%s Slightly lower yoy but at high-30%s 37% 37.0% 36.0% International-beer 14.5% gross and EBITDA mgns +2-3pp (flat, org) gross and EBITDA mgns +2-3pp (flat, org) +2.5pp 17.0% 17.3% 50% of Coca Cola Icecek 14.0% flat-to-positive EBITDA margin positive EBITDA margin (1H +2.7pps) +2pp 16.0% 15.9%

Implied EBITDA (TRYm) 940 1,366 1,333 1,392 Turkish-beer 520 Higher EBITDA in absolute terms Higher EBITDA in absolute terms 592 584 International-beer 235 as above as above 496 476 50% of Coca Cola Icecek 240 as above as above 338 332 Adjustment line -55 -60 <<--- -60

Cost synergies from SABM alliance US$15m for FY12E US$15m for FY12E Source: Company data, Credit Suisse estimates, Thomson Reuters

■ Although 1H12A volume growth in Turkish beer was +5.8% yoy, we view FY12E guidance of “low-single digit growth” as the base case scenario for the following reasons: 1) July and August weather was highly favourable for cold-drink producers but Efes probably lost some opportunity as the Ramadan month started on 20 July this year; 2) The base effect from 4Q11A will be very tough (recall that Efes Turkish beer volumes were +1.4% yoy then, despite excise hikes, the strong base of 4Q10A and adverse weather); and 3) the 12% price hike effective 22 September.

■ Domestic beer pricing has been supported by 14% net price hikes since October 2011 (at Efes’ level, not retail) and also new regulations prohibiting free samples to distributors/selling points in Turkey. Turkish beer ASP grew +13% yoy in 1H12A, far better than the last 4-year average of c6.7% p.a. We expect another mid-double-digit ASP growth in 3Q12E, followed by stronger growth in 4Q12E, including net 8% pricing on top of the excise tax hike that will support Jan-Sep 2013E ASP comps (Figure 35).

Turkish Consumer 14 15 October 2012

Figure 35: Efes increased its pricing more than required by the excise hike; net +8%, on our estimates in TRY, unless otherwise stated price required required before tax to pass-on % increase hike 50cl returnable bottle (TRY) 3.30 3.57 8% VAT (18%) 0.50 0.54 8% Special Consumption Tax 1.33 1.55 17% Selling price w/o tax 1.47 1.47 0%

price Actual Actual before tax increase increase % hike 50cl returnable bottle (TRY) 3.30 3.70 12% VAT (18%) 0.50 0.56 12% Special Consumption Tax 1.33 1.55 17% Selling price w/o tax 1.47 1.59 8%

Assume distributor/retail margin 20% 20% Distributor/retail mark-up (TRY) 0.25 0.26 8% Efes' net selling price 1.23 1.32 8% Source: Company data, Credit Suisse estimates

■ In international beer, 2Q12A was the first full contribution from newly acquired assets from SABMiller, and Efes international’s volumes picked up +48% yoy. We expect a slightly weaker run-rate in 3Q12E given ad restrictions, negative weather in Russia QTD and Efes’ disciplined pricing throughout the year. -11% yoy volume contraction in 2H11A will not make an easy comp either, as it was driven by the extraordinarily strong base of 2H10A.

■ In its 2Q12 conference call, Carlsberg management forecast the Russian beer market volumes to be flat in FY12E.

■ While 2Q12A gross margin in Turkish beer was +c60bps, EBITDA margin fell 410bps on higher opex. Management mentioned “accelerated” investments in on- and off- premise channels. This is a major long-term investment in availability, but the opex impact is likely to last for another 1.5-2 years before Efes resumes c40% EBITDA margins in this segment.

■ 2Q12A was the first full-year contribution from the newly acquired Russian/Ukrainian assets from SABMiller and the divisional gross margin was up +420bps yoy (also helped by successive price hikes). The merged operations remain costly (EBITDA margin almost flat); however, healthy gross margin is a good indicator into FY13E operating margin as Efes will start implementing the bulk of the merger synergies next year (only US$15m pa is targeted this year, out of a 3-year plan of US$120m pa).

■ We are expecting 36% and 17% EBITDA margins for FY12E in Turkish and international beer. We expect a slightly poor harvest in both Turkey and Russia for next year’s procurement. Each 10% theoretical increase in all malt and grain costs moves our FY13E EBITDA margin by 3% and 5% in Turkish and international beer, respectively.

■ We are modelling cUS$70m cost synergies for next year on top of US$15m targeted this year. Management said in its 2Q call that there might be additional procurement synergies from being a part of SABMiller’s global procurement network, which are not yet included in the 3-year synergy plan of US$120m p.a.

Turkish Consumer 15 15 October 2012

Figure 36: Efes: Sum-of-the-parts (SoTP) valuation in TRY millions, unless otherwise stated Equity value Efes’ share Value to Efes Methodology Turkish-beer 6,292 100% 6,292 9.7x/8.6x 12E/13E EV/EBITDA International-beer (EBI) 4,942 100% 4,935 7.6x 2013E EV/EBITDA CCI 9,463 50% 4,756 DCF Financial assets 23 Market value SoTP 16,007 SoTP (TRY/share) 27.00 Current share price 27.20 Upside potential -1% Prices as of 10 October 2012; Source: Credit Suisse estimates, Thomson Reuters

Figure 37: Peer map for AEFES

Source: Company data, Credit Suisse PEERs

PEERs is a global database that captures unique information about companies within the Credit Suisse coverage universe based on their relationships with other companies – their customers, suppliers and competitors. The database is built from our research analysts’ insight regarding these relationships. Credit Suisse covers over 3,000 companies globally. These companies form the core of the PEERs database, but it also includes relationships on stocks that are not under coverage.

Turkish Consumer 16 15 October 2012

Europe / Turkey Soft Drinks

Coca Cola Icecek (CCOLA.IS) Rating NEUTRAL* COMPANY UPDATE Price (10 Oct 12, TRY) 33.90 Target price (TRY) (from 25.70) 37.20¹ Market cap. (TRY m) 8,623.17 ASP growth driving margins Enterprise value (TRY m) 9,630.1 ■ We raise our DCF-based TP from TRY25.70 to TRY37.20 but maintain *Stock ratings are relative to the relevant country benchmark. our Neutral rating. ¹Target price is for 12 months. ■ Good business, valuations too high: We view CCI as a highly attractive Research Analysts long-term growth story in our Turkish consumer coverage (both organic and Onur Muminoglu 90 212 349 0454 inorganic) (24% EBITDA CAGR between 2011-2014E). At 14.6x FY12E [email protected] EV/EBITDA, however, valuations are at the peak of the peer group. Likewise, the stock’s P/E premium to the Turkish equity market is close to its 2-year high Figure 24. With accelerating growth, the premium is justified, in our view. We think any significant profit-taking in the stock might create buying opportunities, though we maintain our Neutral rating at current levels. ■ Strong ASP continues: The 39% earnings beat was one of the best 2Q12A results in the Turkish consumer space. 310bps margin expansion (yoy) was driven by a favourable cost but also by strong average selling price (ASP) improvement. The breakdown of the Consumer Price Index indicates to us that 3Q12E might show another strong ASP in Turkey (Figure 40). ■ We expect a more moderate margin expansion after 3Q12: Although the average net pricing continues to improve, we note that 1) the pricing comps will start facing a stronger base effect from 3Q12E onwards (Figure 40), 2) our cost index for CCI shows a slight bounce-back lately (Figure 41); 3) 4Q11A EBITDA margin will be a very tough comps for CCI (Figure 44). ■ Catalysts: 3Q12E IFRS results in early November. ■ Valuation: 12M forward consensus P/E is at a 106% premium to Turkish equities versus their two-year average of 79%; however, we think the gap is justified due to significantly stronger growth outlook for the company’s foreign operations compared to two years ago.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 36 Revenue (TRY m) 3,408.6 4,155.9 5,067.0 5,759.8 31 EBITDA (TRY m) 476.73 660.00 801.47 913.63 26 Adjusted Net Income (TRY m) 228.4 350.2 441.0 514.4 21 CS adj. EPS (TRY) 0.90 1.38 1.73 2.02 16 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 1.23 1.55 1.91 Price Price relative ROIC (%) 8.91 12.79 14.92 15.94 P/E (adj., x) 37.76 24.62 19.55 16.76 The price relative chart measures performance against the IST P/E rel. (%) 280.9 214.9 190.5 183.7 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 20.5 14.6 11.9 10.4 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 0.51 IC (12/12E, TRY m) 2,946.54

Performance Over 1M 3M 12M Dividend yield (%) 1.5 EV/IC 3.3 Absolute (%) 7.3 26.0 41.0 Net debt (12/12E, TRY m) 1,006.9 Current WACC 11.7 Relative (%) 5.7 15.6 24.5 Net debt/equity (12/12E, %) 51.9 Free float (%) 25.0 BV/share (12/12E, TRY) 7.5 Number of shares (m) 254.37 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 17 15 October 2012

Coca Cola Icecek CCOLA.IS Price (10 Oct 12): TRY33.90, Rating: NEUTRAL, Target Price: TRY(from 25.70) 37.20 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 3,409 4,156 5,067 5,760 No. of shares (wtd avg) 254 254 254 254 EBITDA 477 660 801 914 CS adj. EPS (TRY) 0.90 1.38 1.73 2.02 Depr. & amort. (154) (190) (207) (228) Prev. EPS (TRY) — 1.23 1.55 1.91 EBIT (CS) 323 470 595 685 Dividend (TRY) 0.24 0.51 0.76 0.99 Net interest exp. (23) (25) (30) (28) Dividend payout ratio 26.29 37.30 43.66 48.98 Associates — — — — Free cash flow per share (0.83) 1.10 0.85 1.02 Other adj, (117) 28 (17) (13) PBT (CS) 184 473 548 644 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (42) (94) (114) (134) valuation Profit after tax 142 379 434 510 Growth(%) Minorities (1) (6) (6) (6) Sales 23.8 21.9 21.9 13.7 Preferred dividends — — — — EBIT 14.8 45.6 26.6 15.2 Associates & other 88 (23) 13 10 Net profit 10.2 53.3 25.9 16.6 Net profit (CS) 228 350 441 514 EPS 10.2 53.3 25.9 16.6 Other NPAT adjustments (88) 23 (13) (10) Margins (%) Reported net income 140 373 428 504 EBITDA margin 14.0 15.9 15.8 15.9 EBIT margin 9.5 11.3 11.7 11.9 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 5.4 11.4 10.8 11.2 EBIT 323 470 595 685 Net margin 6.7 8.4 8.7 8.9 Net interest (23) (25) (30) (28) Valuation metrics (x) Cash taxes paid — — — — EV/sales 2.9 2.3 1.9 1.6 Change in working capital 1 (109) (27) (47) EV/EBITDA 20.5 14.6 11.9 10.4 Other cash & non-cash items (17) 301 84 86 EV/EBIT 30.2 20.5 16.0 13.8 Cash flow from operations 284 637 621 696 P/E 37.8 24.6 19.6 16.8 CAPEX (496) (357) (405) (438) P/B 5.2 4.5 3.9 3.4 Free cash flow to the firm (212) 279 216 258 Asset turnover 0.9 0.9 1.1 1.1 Acquisitions — (180) — — ROE analysis (%) Divestments 14 — — — ROE stated-return on 9.2 20.9 20.7 21.3 Other investment/(outflows) 103 2 — — ROIC 8.9 12.8 14.9 15.9 Cash flow from investments (379) (535) (405) (438) Interest burden 0.6 1.0 0.9 0.9 Net share issue/(repurchase) — — — — Tax rate 22.8 19.8 20.8 20.8 Dividends paid (70) (60) (131) (193) Financial leverage 0.99 0.91 0.83 0.69 Issuance (retirement) of debt 141 188 100 (100) Credit ratios (%) Other (494) (114) (100) 100 Net debt/equity 67.5 51.9 41.2 33.6 Cash flow from financing (423) 14 (131) (193) Net debt/EBITDA 2.4 1.5 1.2 0.9 Effect of exchange rates 54 5 — — Interest coverage ratio 14.3 18.5 19.5 24.7 Changes in Net Cash/Debt (464) 121 85 66 . Net debt at start 664 1,128 1,007 922 Source: Company data, Thomson Reuters, Credit Change in net debt 464 (121) (85) (66) Suisse estimates. Net debt at end 1,128 1,007 922 856

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets 36 Cash and cash equivalents 522 757 942 908 31 Accounts receivable 284 389 416 466 26 Inventory 299 345 403 454 21 Other current assets 345 287 287 287 16 Total current assets 1,450 1,779 2,048 2,114 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 1,677 1,982 2,077 2,286 Price Price relative Intangible assets and goodwill 594 567 567 567 Investment securities — — — — Other assets 67 65 65 65 The price relative chart measures performance against the Total assets 3,788 4,393 4,757 5,033 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 275 320 377 430 Short-term debt 125 206 246 206 Other short term liabilities 125 314 224 235 Total current liabilities 526 839 846 870 Long-term debt 1,509 1,539 1,599 1,539 Other liabilities 83 75 75 75 Total liabilities 2,117 2,454 2,520 2,484 Shareholders' equity 1,650 1,918 2,216 2,527 Minority interest 20 21 21 21 Total equity & liabilities 3,788 4,393 4,757 5,033 Net debt (TRY m) 1,128 1,007 922 856

Turkish Consumer 18 15 October 2012

Financial assumptions

■ We expect slightly better yoy volume growth rates in 2H12E in the Turkish business as the base effect moderates. The read-across from the credit-card spend statistics in Turkey was already suggesting better volume growth in 1H12A than the actual result (Figure 38). We think volumes were under pressure from the base effect and CCI’s disciplined pricing, which paid off with significant improvement in EBITDA margins (Figure 40).

Figure 38: We expect moderately better volume growth in Turkey in 2H12

50% 25.0% strong base effect in 1Q11 45% 20.0% 40%

35% 15.0% 30%

25% 10.0%

20% 5.0% 15%

10% 0.0% Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Credit card spent on food + restaurants (yoy) CCI's Turkish volumes (yoy), rhs Source: Company data, Credit Suisse estimates, Turkish Interbank Credit Card Centre

■ Including foreign operations, we estimate 12%/12% volume growth in 3QE/4QE; we expect CCI’s group volumes to grow 11% yoy in FY12E, in-line with guidance.

■ ASP growth has been strong YTD, with both better mix and pricing. The pricing efforts of recent quarters will continue to support revenues and margins in the rest of the year, in our view, but the base comps of pricing (hence revenues) will be tougher as 4Q11A enters the base calculations (Figure 40).

■ Including the recent hike in aluminium and regulated sugar prices in Turkey, we estimate the average cost of raw materials for CCI went up slightly (Figure 41).

■ 1H12 EBITDA margin was +270bps higher yoy. For the reasons we mentioned above, we expect a lower yoy margin expansion in 2H12E.

Figure 39: CCOLA – Credit Suisse forecasts versus consensus and 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 4,156 5,067 23% 22% 22% 4,098 4,768 1% 6% EBITDA 660 801 47% 38% 21% 627 756 5% 6% Margin 15.9% 15.8% 15.3% 15.9% Reported net income 373 428 128% 166% 15% 322 379 16% 13% Adj net income 350 441 61% 53% 26% 299 392 17% 12% Source: Credit Suisse estimates, Thomson Reuters

Turkish Consumer 19 15 October 2012

Figure 40: Strong pricing continues QTD Figure 41: Credit Suisse estimate of raw material index for Price index January 2010=100; CCOLA’s pricing based on 2009=100 CCI and deseasonalised April 2009=100

200 120.00 200 CS cost index for CCI, Apr09=100 115.00 190 180 110.00 180 105.00 160

170 100.00 140 95.00 160 120 Soft-drinks price index in Turkey 90.00 150 100 CCOLA's avg selling price in Turkey (rhs) 85.00 140 80.00 80 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12E Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

in US$ in weighted operating ccy (nom.) in operating currency (real)

Source: Company data, Turkish Central Bank Source: Credit Suisse estimates

Figure 42: 2011-2014E EBITDA CAGR Figure 43: CCI: Valuation versus growth estimates in TRY 30% 30%

25% 25% CCI

20% 20%

15% 15%

10% 10%

5% 5%

0% 0% AEFES * CCOLA BIMAS MGROS ARCLK TOASO FROTO KCHOL 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x

*Adjusted for SABMiller stake, Source: Company data, Credit Suisse Source: Company data, Credit Suisse estimates estimates

Turkish Consumer 20 15 October 2012

Figure 44 CCI: Quarterly EBITDA margin base comps

25.0% Average 3Q EBITDA margin 20.0%

15.0%

10.0%

5.0% Average 4Q EBITDA margin 0.0% 3Q06 4Q06 3Q07 4Q07 3Q08 4Q08 3Q09 4Q09 3Q10 4Q10 3Q11 4Q11 3Q12E 4Q12E

Source: Company data, Credit Suisse estimates

Figure 45: CCI: DCF valuation in millions TRY, unless otherwise stated

DCF 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Term Volume (m ucs) 849 1,007 1,111 1,227 1,356 1,500 1,660 1,839 Net sales 4,156 5,067 5,760 6,548 7,452 8,491 9,684 11,057 EBITDA 660 801 914 1,051 1,209 1,388 1,593 1,828 EBITDA margin 15.9% 15.8% 15.9% 16.1% 16.2% 16.3% 16.5% 16.5% EBIT 470 595 685 800 933 1,087 1,265 1,472 Tax rate 20% 20% 20% 20% 20% 20% 20% 20% Adjusted taxes (94) (119) (137) (160) (187) (217) (253) (294) Capex/acquisitions (537) (405) (438) (471) (507) (543) (581) (619) % of sales -13% -8.0% -7.6% -7.2% -6.8% -6.4% -6.0% -5.6% Change in working capital (109) (27) (47) (52) (57) (63) (70) (77) Free cashflow (80) 250 292 368 458 564 690 837 15,948 Discounted cashflow (20) 230 240 272 303 334 366 398 7,578 Terminal growth (real TRY) 2.0% WACC (TRY) 11.7% PV 9,702 Net debt 1,173 Minorities (incl in Al Waha) 117 Implied market cap 8,411 Number of shares (m) 254 Implied share price (TRY/share) 33.1 12M Target (TRY/share) 37.20 Potential upside 10% Price as of 10 October 2012; Source: Company data, Credit Suisse estimates, Thomson Reuters

Turkish Consumer 21 15 October 2012

Figure 46: Peer map for CCOLA

Source: Credit Suisse PEERs

Turkish Consumer 22 15 October 2012

Europe / Turkey Food Retail

BIM (BIMAS.IS) Rating NEUTRAL* COMPANY UPDATE Price (10 Oct 12, TRY) 73.00 Target price (TRY) (from 70.80) 76.90¹ Market cap. (TRY m) 11,081.40 Expect a partial recovery from weak 2Q12 Enterprise value (TRY m) 10,731.9 ■ We raise our TP from TRY70.80 to TRY76.90, primarily on the back of *Stock ratings are relative to the relevant country benchmark. the lower risk-free rate that we adopt for all Turkish consumer names in ¹Target price is for 12 months. this report, but maintain our Neutral rating. Research Analysts ■ Valuation premium looks in-line with the past…: BIM shares have lagged Onur Muminoglu 90 212 349 0454 the ISE100 index by 7% since the release of weak 2Q12A results. The [email protected] underperformance was driven by a combination of both the 2Q12A miss and the defensive nature of the stock, which typically lags positive momentum in the ISE100. On consensus numbers, BIM’s current P/E premium is in-line with its two-year average (Figure 25). ■ …yet we see downside risk to consensus: We expect a 4.9% FY12E EBITDA margin versus consensus at 5.1%, which looks stretched to us after 1H12A average of 4.9%. Some of the drivers of the 2Q12A EBITDA margin were one-off (ad-spend inflation), but the double electricity tariff hikes (in April and then in October) could leave the FY12E margin below 5.0%. In the meantime, processed-food inflation remained high in 3Q12A, which we view as a negative read-across for BIM’s gross margin (Figure 49). ■ The closest competition is accelerating expansion: Although its bottom line remained negative as of 1H12A, BIM’s closest competitor by format (A101) is continuing to increase its footprint. The hard-discounter has added more stores than BIM over the past few years (Figure 47) and continues with its national brand-advertising strategy. ■ Catalysts: 3Q12E IFRS results in early November. ■ Valuation: 12M forward consensus P/E is at a 141% premium to Turkish equities versus the two-year average of 130%.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E Revenue (TRY m) 8,189.1 10,007.6 12,174.6 14,335.7 85 EBITDA (TRY m) 424.43 490.56 624.41 735.41 65 Adjusted Net Income (TRY m) 298.9 337.2 440.6 524.5 CS adj. EPS (TRY) 1.97 2.22 2.90 3.46 45 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 2.40 — — Price Price relative ROIC (%) 109.28 77.09 83.67 90.48 P/E (adj., x) 37.07 32.86 25.15 21.13 The price relative chart measures performance against the IST P/E rel. (%) 275.8 286.7 245.1 231.5 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 25.2 21.9 17.0 14.3 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 1.67 IC (12/12E, TRY m) 409.13

Performance Over 1M 3M 12M Dividend yield (%) 2.3 EV/IC 26.2 Absolute (%) -1.4 -2.0 35.2 Net debt (12/12E, TRY m) -349.5 Current WACC 12.2 Relative (%) -3.0 -12.4 18.7 Net debt/equity (12/12E, %) -46.1 Free float (%) 65.0 BV/share (12/12E, TRY) 5.0 Number of shares (m) 151.80 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 23 15 October 2012

BIM BIMAS.IS Price (10 Oct 12): TRY73.00, Rating: NEUTRAL, Target Price: TRY(from 70.80) 76.90 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 8,189 10,008 12,175 14,336 No. of shares (wtd avg) 152 152 152 152 EBITDA 424 491 624 735 CS adj. EPS (TRY) 1.97 2.22 2.90 3.46 Depr. & amort. (77) (93) (109) (121) Prev. EPS (TRY) — 2.40 — — EBIT (CS) 347 397 516 615 Dividend (TRY) 1.30 1.67 2.61 3.11 Net interest exp. 18 8 14 19 Dividend payout ratio 66.02 75.00 90.00 90.00 Associates — — — — Free cash flow per share 1.83 1.21 2.35 3.12 Other adj, 12 19 21 22 PBT (CS) 378 425 551 656 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (79) (88) (110) (131) valuation Profit after tax 299 337 441 525 Growth(%) Minorities — — — — Sales 24.6 22.2 21.7 17.8 Preferred dividends — — — — EBIT 19.2 14.4 29.8 19.1 Associates & other — — — — Net profit 21.7 12.8 30.6 19.1 Net profit (CS) 299 337 441 525 EPS 21.7 12.8 30.6 19.1 Other NPAT adjustments — — — — Margins (%) Reported net income 299 337 441 525 EBITDA margin 5.2 4.9 5.1 5.1 EBIT margin 4.2 4.0 4.2 4.3 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 4.6 4.2 4.5 4.6 EBIT 347 397 516 615 Net margin 3.7 3.4 3.6 3.7 Net interest 18 8 14 19 Valuation metrics (x) Cash taxes paid — — — — EV/sales 1.3 1.1 0.9 0.7 Change in working capital 74 38 110 91 EV/EBITDA 25.2 21.9 17.0 14.3 Other cash & non-cash items 20 2 19 12 EV/EBIT 30.8 27.0 20.6 17.2 Cash flow from operations 461 445 660 736 P/E 37.1 32.9 25.2 21.1 CAPEX (183) (261) (303) (262) P/B 18.0 14.6 11.7 10.3 Free cash flow to the firm 278 184 357 474 Asset turnover 4.7 4.9 4.8 4.9 Acquisitions — — — — ROE analysis (%) Divestments 7 4 — — ROE stated-return on 53.5 49.1 51.7 51.9 Other investment/(outflows) 12 (5) — — ROIC 109.3 77.1 83.7 90.5 Cash flow from investments (164) (261) (303) (262) Interest burden 1.1 1.1 1.1 1.1 Net share issue/(repurchase) — — — — Tax rate 20.9 20.6 20.0 20.0 Dividends paid (182) (197) (253) (397) Financial leverage — — — — Issuance (retirement) of debt (8) — — — Credit ratios (%) Other 11 (4) — — Net debt/equity (59.2) (46.1) (47.9) (49.4) Cash flow from financing (179) (201) (253) (397) Net debt/EBITDA (0.86) (0.71) (0.73) (0.72) Effect of exchange rates (3) 2 — — Interest coverage ratio (18.9) (49.3) (37.1) (32.2) Changes in Net Cash/Debt 115 (15) 104 78 . Net debt at start (250) (365) (350) (453) Source: Company data, Thomson Reuters, Credit Change in net debt (115) 15 (104) (78) Suisse estimates. Net debt at end (365) (350) (453) (531)

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets Cash and cash equivalents 365 350 453 531 Accounts receivable 271 303 369 434 85 Inventory 405 519 600 707 Other current assets 34 55 55 55 65 Total current assets 1,074 1,227 1,477 1,727 Total fixed assets 648 807 1,028 1,169 45 Intangible assets and goodwill 3 3 3 3 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Investment securities — — — — Other assets 7 24 24 24 Price Price relativ Total assets 1,733 2,060 2,531 2,922 Liabilities The price relative chart measures performance against the Accounts payable 890 1,069 1,315 1,571 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Short-term debt — — — — On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Other short term liabilities 203 206 249 256 Eu .78/US$1 Total current liabilities 1,093 1,275 1,564 1,827 Long-term debt — — — — Other liabilities 24 26 21 21 Total liabilities 1,117 1,301 1,585 1,848 Shareholders' equity 616 759 946 1,074 Minority interest — — — — Total equity & liabilities 1,733 2,060 2,531 2,922 Net debt (TRY m) (365) (350) (453) (531)

Turkish Consumer 24 15 October 2012

Figure 47: Domestic store-count

4,000 2.1x

3,500 5.7x 3,000

2,500

2,000

1,500

1,000

500

0 Jan-10 Jan-11 Sep-11 Jan-12 Sep-12 A101 BIM

Source: Company data, ortakalan Financial assumptions

■ High (processed) food inflation and a tough winter helped neighbourhood retailers’ like-for-like revenues in 4Q11A and 1Q12A. However, all three major listed food retailers saw their revenue growth moderating in 2Q12A (Figure 48.

■ Among the three, BIM saw the biggest decline in yoy revenue growth rates in 2Q12A. We expect slightly lower revenues in 3Q12E, while 4Q12E will face a very strong base from last year. We forecast 22% yoy top-line growth in FY12E, in-line with guidance, but below 1H12A’s run-rate of >25%.

Figure 48: Revenue growth Figure 49: Food inflation versus BIM’s gross margin In TRY, yoy (inverted) 35% 30.0 BIM gross 14% CPI processed margin% 1Q12 2Q12 food (% yoy) (inverted) 30% 25.0 15% 25% 20.0 16% 20% 15.0 10.0 15% 17% 5.0 10% 3Q12 18% 0.0 5%

-5.0 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12E 19% 0% BIM Migros BIZIM processed food inf in Turkey (% yoy) BIM gross margin (inverted)

Source: Company data Source: Turkish Central Bank, Company data, Credit Suisse estimates

■ High processed food inflation in 3Q12A is a negative indicator for our BIM gross margin estimate for 3Q12E. 4Q12E will face easier base comps (Figure 49).

■ 2Q12A EBITDA margin was hit by a number of opex drivers. Among them, ad-spend inflation should normalise as management stated that the heavy promotions of the new BIMCell product would be over by June 2012. Electricity price hikes have been effective since early April, therefore they already had their full-quarter effect in 2Q12. 4Q12E opex should include another recent hike to utility prices effective 1 October.

Turkish Consumer 25 15 October 2012

Figure 50: BIM – opex breakdown (2012E) Figure 51: BIM – opex-to-sales

Maintenance 14.0% 2% Ad Others 3% 12.0% Transportation 9% Personnel costs 0.3% 3% 45% 0.3% 0.3% 0.5% 0.3% 10.0% 0.3% 0.3% 0.3% 0.6% 0.6% Packaging 0.5% 0.7% 0.7% 0.5% 0.4% 0.6% 4% 8.0% Utilities 5% 6.0%

4.0% D&A 8% 2.0% Opex = 11.7% of sales in 0.0% FY12E 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12e 4Q12e Rent 21% Personnel costs Rent D&A Utilities Packaging Transportation Ad Maintenance Others

Source: Credit Suisse estimates Source: Company data, Credit Suisse estimates

■ We expect EBITDA margin to improve seasonally from the very low base of 2Q12A but still remain below the benchmark 5.0% in FY12E.

■ We are 5% below consensus on FY12E net earnings, which indicates c10% for 2H12E.

Figure 52: BIM – Credit Suisse forecasts versus consensus and 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 10,008 12,175 25% 22% 22% 10,069 12,184 -1% 0% EBITDA 491 624 16% 16% 27% 512 625 -4% 0% Margin 4.9% 5.1% -5% 5.1% 5.1% Net income 337 441 13% 13% 31% 356 433 -5% 2% Source: Credit Suisse estimates, Thomson Reuters

Turkish Consumer 26 15 October 2012

Figure 53: BIM: DCF valuation in TRY millions, unless otherwise stated 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Term Net sales 10,008 12,175 14,336 16,401 18,495 20,689 23,062 25,653 yoy 22% 22% 18% 14% 13% 12% 11% 11% EBITDA 491 624 735 841 949 1,061 1,183 1,316 EBITDA margin 4.9% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% EBIT 397 516 615 710 808 912 1,025 1,149 Tax rate 20% 20% 20% 20% 20% 20% 20% 20% Adjusted taxes (79) (103) (123) (142) (162) (182) (205) (230) NOPAT 318 413 492 568 647 730 820 919 Depreciation 93 109 121 131 140 149 158 167 Net capex (261) (303) (262) (251) (245) (250) (260) (270) Capex/sales -2.6% -2.5% -1.8% -1.5% -1.3% -1.2% -1.1% -1.1% Change in W/C 38 110 91 87 88 92 99 119 FCF 188 329 441 535 629 720 817 936 14,909 Discounted cashflow 42 302 362 391 410 418 423 431 6,875 Terminal growth - real 2.5% Terminal growth - nominal 5.6% PV 9,654 Net cash 163 Morocco franchise 583 Implied curent market cap 10,401 12M Target (TRY/share) 76.9 Upside Potential 5% Price as of 10 October 2012, Source: Company data, Credit Suisse estimates, Thomson Reuters

Figure 54: Peer map for BIMAS

Source: Credit Suisse PEERs

Turkish Consumer 27 15 October 2012

Europe / Turkey Food Retail

Migros (MGROS.IS) Rating OUTPERFORM* COMPANY UPDATE Price (10 Oct 12, TRY) 19.25 Target price (TRY) (from 21.75) 23.75¹ Market cap. (TRY m) 3,427.08 Fundamentals more resilient than discounters Enterprise value (TRY m) 4,953.6 ■ We raise our TP from TRY21.75 to TRY23.75 on our lower risk-free rate *Stock ratings are relative to the relevant country benchmark. assumption for the sector and maintain our Outperform rating. ¹Target price is for 12 months. ■ M&A potential intact: We continue to see Migros as the most likely M&A Research Analysts story within our Turkish consumer coverage given press reports earlier this Onur Muminoglu 90 212 349 0454 year quoting the Chairman, Mr. Ozaydinli, as highlighting a potential change [email protected] in the ownership structure in the future (Vatan daily, 15 June 2012). We note that the current low-interest-rate environment should be favourable for ongoing sector M&A. We also think Migros’ first-mover store locations, profitable execution, sustained growth and good exposure to the mid-to-high income segments might make it an attractive target for a strategic investor. ■ Execution is beyond expectations: 1) YTD net store adds (in Turkey) were c.170 annualised, above the upwardly revised guidance of 150. 2) Although Migros’ multi-format is a more discretionary exposure to Turkish food- retailing than BIM and BIZIM’s low-cost models, the yoy revenue performance of Migros was much more resilient than the other two in 2Q12A (Figure 48). 3) The cost impact of accelerated store additions on EBITDA margin has been kept limited (2Q12A: 5.8%). ■ Catalysts: 3Q12E IFRS results towards mid-November. ■ Valuation: 12M forward consensus P/E is at a 23% discount to the Turkish equities average. Although this is in-line with the historical two-year average (24%), we believe M&A optionality makes a premium justifiable.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E Revenue (TRY m) 5,753.1 6,471.8 7,372.2 8,227.5 31 EBITDA (TRY m) 376.41 378.82 439.49 496.96 21 Adjusted Net Income (TRY m) -279.7 60.2 101.9 144.0 CS adj. EPS (TRY) -1.57 0.34 0.57 0.81 11 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 0.48 0.78 1.04 Price Price relative ROIC (%) 10.66 8.13 8.91 10.68 P/E (adj., x) -12.25 56.90 33.63 23.80 The price relative chart measures performance against the IST P/E rel. (%) -91.2 496.5 327.7 260.8 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 13.3 13.1 11.0 9.4 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) — IC (12/12E, TRY m) 2,841.81

Performance Over 1M 3M 12M Dividend yield (%) — EV/IC 1.7 Absolute (%) -2.3 2.7 27.5 Net debt (12/12E, TRY m) 1,526.5 Current WACC 12.4 Relative (%) -3.9 -7.8 11.0 Net debt/equity (12/12E, %) 116.1 Free float (%) 19.5 BV/share (12/12E, TRY) 6.5 Number of shares (m) 178.03 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 28 15 October 2012

Migros MGROS.IS Price (10 Oct 12): TRY19.25, Rating: OUTPERFORM, Target Price: TRY(from 21.75) 23.75 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 5,753 6,472 7,372 8,228 No. of shares (wtd avg) 178 178 178 178 EBITDA 376 379 439 497 CS adj. EPS (TRY) (1.57) 0.34 0.57 0.81 Depr. & amort. (124) (128) (131) (135) Prev. EPS (TRY) — 0.48 0.78 1.04 EBIT (CS) 253 250 308 362 Dividend (TRY) — — 0.05 0.17 Net interest exp. (548) (87) (246) (227) Dividend payout ratio — — 8.01 20.51 Associates — — — — Free cash flow per share 0.04 (0.14) 0.66 0.85 Other adj, (20) (25) (11) (12) PBT (CS) (316) 138 51 123 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (53) (11) (10) (25) valuation Profit after tax (369) 127 41 98 Growth(%) Minorities — — — — Sales (9.6) 12.5 13.9 11.6 Preferred dividends — — — — EBIT 11.9 (0.9) 23.0 17.6 Associates & other 90 (67) 61 46 Net profit (1,075.7) (121.5) 69.2 41.3 Net profit (CS) (280) 60 102 144 EPS (1,075.7) 121.5 69.2 41.3 Other NPAT adjustments (90) 67 (61) (46) Margins (%) Reported net income (369) 127 41 98 EBITDA margin 6.5 5.9 6.0 6.0 EBIT margin 4.4 3.9 4.2 4.4 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin (5.5) 2.1 0.7 1.5 EBIT 253 250 308 362 Net margin (4.9) 0.9 1.4 1.7 Net interest (548) (87) (246) (227) Valuation metrics (x) Cash taxes paid — — — — EV/sales 0.87 0.77 0.66 0.57 Change in working capital (122) (107) 51 40 EV/EBITDA 13.3 13.1 11.0 9.4 Other cash & non-cash items 591 80 149 126 EV/EBIT 19.8 19.8 15.7 13.0 Cash flow from operations 173 136 262 302 P/E (12.3) 56.9 33.6 23.8 CAPEX (166) (160) (145) (150) P/B 2.6 3.0 2.7 2.6 Free cash flow to the firm 8 (24) 117 152 Asset turnover 1.0 1.2 1.4 1.5 Acquisitions — — — — ROE analysis (%) Divestments 598 1 — — ROE stated-return on (28.3) 10.2 3.3 7.6 Other investment/(outflows) 47 34 — — ROIC 10.7 8.1 8.9 10.7 Cash flow from investments 479 (124) (145) (150) Interest burden (1.3) 0.6 0.2 0.3 Net share issue/(repurchase) — — — — Tax rate (16.9) 7.7 20.0 20.0 Dividends paid — — — (8) Financial leverage 1.9 2.1 1.7 1.5 Issuance (retirement) of debt (262) (20) (142) (301) Credit ratios (%) Other (465) 58 142 301 Net debt/equity 131.8 116.1 104.0 87.5 Cash flow from financing (727) 38 — (8) Net debt/EBITDA 4.2 4.0 3.2 2.5 Effect of exchange rates 1 (0) (0) (0) Interest coverage ratio 0.5 2.9 1.3 1.6 Changes in Net Cash/Debt (74) 49 117 143 . Net debt at start 1,502 1,576 1,527 1,410 Source: Company data, Thomson Reuters, Credit Change in net debt 74 (49) (117) (143) Suisse estimates. Net debt at end 1,576 1,527 1,410 1,266

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets Cash and cash equivalents 1,010 857 832 675 31 Accounts receivable 67 58 66 74 Inventory 679 661 752 840 21 Other current assets 41 58 58 58 11 Total current assets 1,798 1,634 1,709 1,647 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 1,119 1,146 1,159 1,174 Price Price relative Intangible assets and goodwill 2,502 2,499 2,499 2,499 Investment securities — — — — Other assets 63 57 57 57 The price relative chart measures performance against the Total assets 5,481 5,337 5,425 5,377 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 1,387 1,285 1,435 1,570 Short-term debt 14 153 553 453 Other short term liabilities 178 222 260 288 Total current liabilities 1,579 1,659 2,249 2,312 Long-term debt 2,574 2,233 1,690 1,490 Other liabilities 133 129 129 129 Total liabilities 4,285 4,021 4,069 3,931 Shareholders' equity 1,195 1,315 1,356 1,446 Minority interest 0.48 0.51 0.51 0.51 Total equity & liabilities 5,481 5,337 5,425 5,377 Net debt (TRY m) 1,576 1,527 1,410 1,266

Turkish Consumer 29 15 October 2012

Financial assumptions

■ Despite its more discretionary multi-format exposure, the sequential decline in yoy revenue growth was more defensive than BIM and Bizim Toptan (Not Rated) (Figure 48).

■ Store additions slowed in August and September to 72 annualised on average, after a very high January-July run-rate of c200 annualised openings. The slowdown was partly due to overhang from pull-forward openings in July and also Ramadan capturing most of August. We forecast 160 net store additions in FY12E (plus 2 abroad).

■ We think there is scope for meeting the FY12E revenue growth target of “double- digits” (1H12A:14% yoy). The launch of the successful “nostalgia” campaign last year sets a strong base for some of the months in H212E.

■ Net sqm additions were much lower than the store-adds as most of the new stores have small sqm. We model 12% sqm expansion in FY12E compared to 22% store growth (year-end).

■ Not only revenue growth but also the level of EBITDA margin was surprisingly resilient in 2Q12A against the cost of accelerating store adds.

■ According to management, the following drivers helped maintain profitability: 1) the more efficient distribution network after the significant logistics investments in the past two years (enabling less inventory space per store/more fresh-category sales/less shrinkage ratio); 2) smaller stores are gaining share in the format mix and Migros is using less promotions in these smaller formats; and 3) the higher use of tailor-made promotions instead of across-the-board discounts.

■ We estimate 5.9% EBITDA margin for FY12E (1H12A: 6.0%). The guidance is 6.0- 6.5% but management’s EBITDA definition includes some additional items such as provisions for employee termination benefits (c0.5% of sales).

■ New regulations have restricted payable days of food retailers by 60+30 days effective July 2012. We think the regulatory curbing of payable days will move the intrinsic interest component embedded in CoGS from below-the-line interest income to lower CoGS (hence margin positive).

■ 3Q12E will likely see sizable reversals of non-cash FX losses generated in 1H12A given the company’s EUR880m net short position as of June 2012. FX gains (losses) are not included in the corporate tax base, hence they yield higher effective tax rates when the TRYEUR depreciates.

Figure 55: Migros – Credit Suisse forecasts versus consensus and 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 6,472 7,372 14% 12% 14% 6,563 7,475 -1% -1% EBITDA 379 439 8% 1% 16% 418 481 -9% -9% Margin 5.9% 6.0% 6.4% 6.4% Reported net income* 127 41 n/m n/m -68% 122 132 5% n/m Adjusted net income 60 102 n/m n/m 69% n/a n/a *Our reported net income assumes reversal of 2012E’s FX-gains into FX-losses in 2013E, which might not be in consensus numbers in our opinion. Source: Credit Suisse estimates, Thomson Reuters

Turkish Consumer 30 15 October 2012

Figure 56: Migros: Blended valuation Figure 57: Migros: Multiples-driven fair value in TRY/share, unless otherwise stated EV/Sales EV/EBITDA Weight Fair equity value 2012E 2013E 2012E 2013E DCF 50% 26.30 Target Multiples 0.99x 0.86x 11.0x 9.2x Multiples 50% 21.20 Migros financial 6,472 7,372 379 439 Target price 23.75 Fair equity value 4,869 4,933 2,641 2,648 Current price 19.25 Average 3,773 Upside potential 23% Fair equity value (TRY/share) 21.20 Price as of 10 October 2012. Source: Credit Suisse Source Credit Suisse estimates estimates, Thomson Reuters

Figure 58: Migros: DCF-driven fair value In TRY millions, unless otherwise stated Terminal 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E value Net sales 6,472 7,372 8,228 9,071 9,949 10,873 11,842 12,859 YoY 12% 14% 12% 10% 10% 9% 9% 9% EBITDA 379 439 497 556 615 672 729 781 EBITDA margin 5.9% 6.0% 6.0% 6.1% 6.2% 6.2% 6.2% 6.1% EBIT 250 308 362 418 473 527 580 627 Tax rate 20% 20% 20% 20% 20% 20% 20% 20% Adjusted taxes (50) (62) (72) (84) (95) (105) (116) (125) NOPAT 200 246 290 335 378 421 464 502 Depreciation 128 131 135 138 142 145 149 154 Net capex (160) (145) (150) (154) (160) (166) (173) (180) Capex/sales -2.5% -2.0% -1.8% -1.7% -1.6% -1.5% -1.5% -1.4% Change in W/C (107) 51 40 70 73 77 81 86 FCF 62 284 315 389 433 477 521 561 8,008 Terminal growth - real 1.0% Terminal growth - nominal 5.0% PV 5,541 Net debt 1,444 Minorities 1 Implied market cap 4,096 Number of shares (m) 178 Implied equity value (TRY/share) 23.0 12M Target (TRY/share) 26.30 Upside Potential 37% Price as of 10 October 2012; Source: Company data, Credit Suisse estimates, Thomson Reuters

Turkish Consumer 31 15 October 2012

Figure 59: Peer map for MGROS

Source: Credit Suisse PEERs

Turkish Consumer 32 15 October 2012

Europe / Turkey Household Durables

Arcelik (ARCLK.IS) Rating OUTPERFORM* COMPANY UPDATE Price (10 Oct 12, TRY) 9.92 Target price (TRY) (from 9.70) 12.50¹ Market cap. (TRY m) 6,703.22 Impressive international execution Enterprise value (TRY m) 8,278.7 ■ We raise our TP from TRY9.70 to TRY12.50 and maintain our Outperform rating. *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. ■ Europe trading down represents an opportunity: Arcelik had its largest

Research Analysts market share gains when Europe traded down; yet it maintained (if not Onur Muminoglu added) share gains post-cycle (Figure 60). We believe these trade-downs 90 212 349 0454 are not only a cyclical opportunity that help market share until consumer [email protected] confidence is restored, but that they also provide Arcelik with a chance to demonstrate its R&D focus and product quality for long-term brand equity. ■ Drivers of share gains seem structural: We believe that 1) European retailers will increasingly prefer shorter lead times in their product orders to reduce working capital, hence switch to closer manufacturers; 2) Arcelik’s investments in product reliability should be paying off, with lower warranty costs for retailers (which equals more mark-ups on Arcelik products); and 3) Arcelik has continued investing in its brands. ■ Peer valuations and Yapi Kredi Bank stake help valuation: Major global peers have been re-rated lately (Figure 62). Likewise, Arcelik’s 3.3% effective stake in YKB contributed +TRY244m to Arcelik’s equity valuation YTD, now accounting for c.9% of MCAP. Our TP for YKB indicates 23% more potential upside in YKB. ■ Although the revenue mix fluctuates in the interim, sequential appreciation of the EUR/US$ is generally supportive of short-term margins (Figure 20). ■ Catalysts: 1) 3Q12E IFRS results around the last week of October; 2) Arcelik is Koc Holding’s largest consumer company without a foreign partner, hence the holding co is particularly supportive of Arcelik’s inorganic expansion plans, in our view; and 3) management maintains a 5pp improvement target in W/C-to-sales for FY12E (+TRY0.72/share). ■ Valuation: Shares are trading at an 8% discount to major global peers on 12M forward consensus P/E versus the two-year average of a +2% premium.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 11 Revenue (TRY m) 8,437.2 11,051.3 12,078.2 13,243.3 9 EBITDA (TRY m) 876.39 1,084.27 1,206.54 1,399.85 Adjusted Net Income (TRY m) 540.7 598.1 665.1 828.5 7 CS adj. EPS (TRY) 0.80 0.89 0.98 1.23 5 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 0.94 1.03 1.20 Price Price relative ROIC (%) 11.38 13.07 13.78 15.34 P/E (adj., x) 12.40 11.21 10.08 8.09 The price relative chart measures performance against the IST P/E rel. (%) 92.2 97.8 98.2 88.6 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 9.3 7.6 6.7 5.7 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 0.46 IC (12/12E, TRY m) 5,475.05

Performance Over 1M 3M 12M Dividend yield (%) 4.7 EV/IC 1.5 Absolute (%) -2.7 14.5 39.7 Net debt (12/12E, TRY m) 1,575.4 Current WACC 12.2 Relative (%) -4.3 4.1 23.3 Net debt/equity (12/12E, %) 40.4 Free float (%) 25.0 BV/share (12/12E, TRY) 5.6 Number of shares (m) 675.73 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 33 15 October 2012

Arcelik ARCLK.IS Price (10 Oct 12): TRY9.92, Rating: OUTPERFORM, Target Price: TRY(from 9.70) 12.50 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 8,437 11,051 12,078 13,243 No. of shares (wtd avg) 676 676 676 676 EBITDA 876 1,084 1,207 1,400 CS adj. EPS (TRY) 0.80 0.89 0.98 1.23 Depr. & amort. (218) (263) (274) (286) Prev. EPS (TRY) — 0.94 1.03 1.20 EBIT (CS) 659 822 932 1,114 Dividend (TRY) 0.46 0.46 0.51 0.63 Net interest exp. (59) (142) (156) (148) Dividend payout ratio 57.33 52.34 51.58 51.31 Associates 28 36 40 48 Free cash flow per share (0.66) 0.47 0.98 0.88 Other adj, (13) 19 21 23 PBT (CS) 615 735 838 1,037 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (74) (95) (136) (170) valuation Profit after tax 541 640 701 867 Growth(%) Minorities (35) (34) (35) (37) Sales 21.6 31.0 9.3 9.6 Preferred dividends — — — — EBIT 16.4 24.8 13.5 19.5 Associates & other 34 (8) (1) (2) Net profit 15.1 10.6 11.2 24.6 Net profit (CS) 541 598 665 829 EPS 15.1 10.6 11.2 24.6 Other NPAT adjustments (34) 8 1 2 Margins (%) Reported net income 507 606 666 830 EBITDA margin 10.4 9.8 10.0 10.6 EBIT margin 7.8 7.4 7.7 8.4 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 7.3 6.6 6.9 7.8 EBIT 659 822 932 1,114 Net margin 6.4 5.4 5.5 6.3 Net interest (59) (142) (156) (148) Valuation metrics (x) Cash taxes paid — — — — EV/sales 0.96 0.75 0.67 0.60 Change in working capital (989) (537) (154) (378) EV/EBITDA 9.3 7.6 6.7 5.7 Other cash & non-cash items 303 508 323 301 EV/EBIT 12.4 10.1 8.7 7.2 Cash flow from operations (86) 650 945 889 P/E 12.4 11.2 10.1 8.1 CAPEX (360) (334) (285) (295) P/B 1.9 1.8 1.6 1.4 Free cash flow to the firm (445) 316 660 594 Asset turnover 0.9 1.0 1.1 1.1 Acquisitions (495) — — — ROE analysis (%) Divestments — 1 — — ROE stated-return on 14.7 16.5 16.8 18.9 Other investment/(outflows) 44 38 — — ROIC 11.4 13.1 13.8 15.3 Cash flow from investments (810) (294) (285) (295) Interest burden 0.93 0.89 0.90 0.93 Net share issue/(repurchase) — — — — Tax rate 12.1 12.9 16.3 16.4 Dividends paid (262) (310) (313) (343) Financial leverage 0.89 0.97 0.86 0.73 Issuance (retirement) of debt 1,090 488 (100) (150) Credit ratios (%) Other (1,359) (672) (64) (7) Net debt/equity 39.4 40.4 32.6 27.2 Cash flow from financing (531) (494) (477) (500) Net debt/EBITDA 1.6 1.5 1.2 0.9 Effect of exchange rates — — — — Interest coverage ratio 11.2 5.8 6.0 7.6 Changes in Net Cash/Debt (1,427) (138) 182 94 . Net debt at start 11 1,437 1,575 1,393 Source: Company data, Thomson Reuters, Credit Change in net debt 1,427 138 (182) (94) Suisse estimates. Net debt at end 1,437 1,575 1,393 1,299

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets Cash and cash equivalents 1,174 1,519 1,607 1,557 11 Accounts receivable 3,181 3,722 3,971 4,318 9 Inventory 1,530 1,861 1,985 2,177 7 Other current assets 149 128 125 125 5 Total current assets 6,034 7,231 7,688 8,176 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 1,447 1,964 1,975 1,984 Price Price relative Intangible assets and goodwill 979 945 945 945 Investment securities 658 684 684 684 Other assets 79 88 91 95 The price relative chart measures performance against the Total assets 9,198 10,912 11,383 11,884 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 1,250 1,588 1,806 1,966 Short-term debt 1,629 2,253 2,203 2,128 Other short term liabilities 652 1,286 1,260 1,238 Total current liabilities 3,531 5,126 5,269 5,332 Long-term debt 1,528 1,405 1,355 1,280 Other liabilities 487 481 490 501 Total liabilities 5,546 7,012 7,115 7,113 Shareholders' equity 3,546 3,786 4,149 4,646 Minority interest 106 114 119 125 Total equity & liabilities 9,198 10,912 11,383 11,884 Net debt (TRY m) 1,437 1,575 1,393 1,299

Turkish Consumer 34 15 October 2012

Figure 60: Western Europe: Major appliances market Figure 61: UK: Major appliances market shares shares units units

70 60

60 50

50 40 40 8.9 9.7 30 8.8 8.1 8.0 8.2 8.4 30 4.8 5.0 5.2 5.3 6.7 7.7 8.9 20 20

10 10

0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 BSH Bosch & Siemens Hausgerate Electrolux Arcelik Indesit Whirlpool BSH Bosch & Siemens Hausgerate Electrolux Arcelik Indesit Whirlpool Source: Euromonitor Source: Euromonitor

Figure 62: Arcelik: Consensus 12M forward P/E for major- Figure 63: Arcelik: 12M forward P/E premium to major global peers global peers %; excluding Fisher and Paykel App. 13.0x 40% 12.0x 30% 11.0x

10.0x 20%

9.0x 10% 8.0x 0% 7.0x -10% 6.0x

5.0x -20%

4.0x -30% Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Oct-10 Oct-11 Oct-12 Apr-11 Apr-12 Jun-11 Jun-12 Feb-11 Feb-12 Arcelik WHR Electrolux Indesit Dec-10 Aug-11 Dec-11 Aug-12 Source: Thomson Reuters Source: Thomson Reuters

Financial assumptions

■ Domestic white-good demand is struggling to beat the strong base of last year (Figure 64). Jan-Aug unit sales growth was -1% yoy; the remaining months are seasonally too small to make a major impact in the annual numbers. We cut our FY12E forecast from +8.5% to flat yoy.

■ However, we think Arcelik can meet its c.5% yoy guidance for the Turkish white-goods market. Although the Turkish White Goods Manufacturers’ Association (BESD) does not split the industry aggregate into brands, Arcelik said in its 2Q call that it has seen above-market growth rates in some key markets, including Turkey and South Africa (no details).

■ Industry exports have been growing double-digits despite the weakness in the Euro- zone (a key export market) and the very strong base of last year.

Turkish Consumer 35 15 October 2012

Figure 64: Turkish white-goods domestic shipments Figure 65: Turkish white-goods export shipments units units Jan-Aug-2012: 700,000 Aug-2012: ARCLK guides +5% for 1,600,000 13.4% yoy 0% yoy FY12E vs. YTD: -1% 1,400,000 600,000 base 1,200,000 strength 500,000 1,000,000 800,000

400,000 600,000

400,000 300,000 200,000

200,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2005-2010 Range 2005-2010 2011 2012 2011 2012 Source: BESD Source: BESD

■ The LCD business was another business line that performed well. Much of the strength in the end-demand was attributable to the 2012 European Football Championship and then the Olympics; however, we believe there are structural drivers, such as continuing migration to flat-screen TVs, that will keep the run-rate strong in coming quarters as well.

■ Arcelik said it increased average domestic pricing in May (will contribute more to 3Q12E numbers than it did to 2Q12A).

■ Our estimate of the six-month forward raw materials index suggests slightly worse average input costs for Arcelik in 3Q12E qoq, but we see it improving afterwards. Figure 66: Credit Suisse estimate of raw materials for Figure 67: Credit Suisse estimate of the raw materials Arcelik index for Arcelik versus 6-mo forward EBITDA margin (inverted) 20% 30 110 18% 100 40

16% (inverted) 90 50 Margin outlook 80 14% looks positive from spot 60 70 12% commodities 70 60 10% 50 80 8% 40 6% 90 30 4% 100 20 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12e 1Q13e Arcelik quarterly EBITDA margin (inverted) CS est for Arcelik's RM index (6-mo frwd) (rhs) Source: Thomson Reuters, Credit Suisse estimates Source: Company data, Thomson Reuters, Credit Suisse estimates

■ Margin dilution from the high-growth TV business moved the FY12E EBITDA margin guidance from mid-range 11.25% down to 10.5% (1HA:9.8%). Yet a (doable) 30% theoretical top-line growth at the revised 10.5% margin guidance would imply almost the same absolute FY12E EBITDA as the previous growth/margin guidance mix (20%/11.25%). Therefore, we do not see lower margin guidance as a downgrade to management’s EBITDA outlook for FY12E.

Turkish Consumer 36 15 October 2012

■ Working capital will be a significant KPI in 2H12E given the stretched levels of c39% (of 12M-trailing sales) as of end-1H12A. Management cited some seasonal factors, such as extended receivables to dealers ahead of the high season and temporary inventory build-ups in the production schedule, and maintained a 5pp improvement target through YE12E. We expect another small improvement in 3Q12E but in absolute terms; very strong top-line growth should still yield a negative W/C-change for the year.

■ The reclassification of the interest income from short-term receivables as revenues, instead of interest income previously, should move c.TRY28m income to above-the- line, on our FY12E estimates (30bps positive margin impact). This accounting change was first implemented in mid-2011, hence, yoy EBITDA comps will be slightly stronger in 2H12E than in 1H12A (but vice-versa for the net financial income). Figure 68: Arcelik – Credit Suisse forecasts versus consensus and the 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 11,051 12,078 39% 31% 9% 10,453 11,300 6% 7% EBITDA 1,084 1,207 20% 24% 11% 1,108 1,233 -2% -2% Margin 9.8% 10.0% 10.6% 10.9% Reported net income 606 666 10% 20% 10% 645 717 -6% -7% CS net income 598 665 7% 11% 11% 645 717 -7% -7% Source: Credit Suisse estimates, Thomson Reuters

Figure 69: Arcelik – Valuation in TRY per share, unless otherwise stated Fair Weight value DCF 50% 12.80 Peers 50% 12.10 Target price 12.50 Current price 9.92 Potential upside 26% Price as of 10 October 2012; Source: Thomson Reuters, Credit Suisse estimates

Figure 70: Arcelik – Summary peers valuation

Current Target MCAP EV / sales EV / EBITDA P / E 2011/14E CAGR Company Ccy Price Price Rating (US$ m) 2012E 2013E 2012E 2013E 2012E 2013E Sales EBITDA Net inc Electrolux SEK 164.20 190.00 O/P 6,999 0.5 0.4 5.8 4.7 12.5 9.7 5% 15% 20% Fisher & Paykel App NZD 1.23 na na 728 1.4 1.3 12.8 11.1 20.7 15.9 3% 15% 33% Indesit EUR 3.84 na na 564 0.2 0.2 3.1 2.6 11.2 7.3 2% -1% 2% Whirlpool USD 84.82 na na 6,577 0.4 0.4 5.3 5.0 13.2 10.9 2% 14% -1% MCAP weighted Average 0.5 0.5 5.8 5.0 13.2 10.5 3% 14% 11% Arcelik TRY 9.92 12.50 O/P 3,743 0.7 0.7 7.6 6.7 11.2 10.1 16% 17% 18% Arcelik consensus 0.8 0.7 7.5 6.6 10.4 9.3 13% 16% 16% Target premium to peer group 10% 10% Target multiples 14.5 11.5 Implied equity value 8,707 7,689 Implied fair share price (TRY/share) 12.10 I/B/E/S consensus estimates for Fisher App, Indesit and Whirlpool; CS estimates for Electrolux; Price as of 10 October 2012; Source: Thomson Reuters, Credit Suisse estimates

Turkish Consumer 37 15 October 2012

Figure 71: Arcelik – DCF-driven fair value in TRY millions, unless otherwise stated 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Term Net sales 11,051 12,078 13,243 14,398 15,665 17,053 18,576 20,247 EBITDA 1,084 1,207 1,400 1,536 1,686 1,851 2,035 2,238 EBITDA margin 9.8% 10.0% 10.6% 10.7% 10.8% 10.9% 11.0% 11.1% EBIT 822 932 1,114 1,239 1,378 1,532 1,705 1,898 Regular tax rate 14% 17% 17% 20% 20% 20% 20% 20% Adjusted taxes (111) (158) (189) (248) (276) (306) (341) (380) NOPAT 710 774 925 991 1,102 1,226 1,364 1,518 Depreciation 263 274 286 297 308 319 330 340 Net capex (333) (285) (295) (304) (313) (322) (332) (342) Change in W/C (537) (154) (378) (397) (435) (477) (523) (574) FCF 103 609 537 588 662 746 839 942 13,788 Discounted cashflow 23 560 441 429 431 433 433 434 6,350 Terminal growth - real 1.0% Terminal growth - nominal 5.0% PV 9,534 Net debt (adj for divs) 2,541 Minorities 114 Market value of YKB stake 621 Book value of financial assets 174 Implied equity value 7,675 Number of shares (m) 676 Implied equity value (TRY / share) 11.36 12M Target (TRY / share) 12.80 Current price (TRY / share) 9.92 Upside potential 29% Price as of 10 October 2012; Source: Company data, Credit Suisse estimates, Thomson Reuters

Figure 72: Peer map for ARCLK

Source: Credit Suisse PEERs

Turkish Consumer 38 15 October 2012

Europe / Turkey Automobile Manufacturers

Tofas (TOASO.IS) Rating OUTPERFORM* COMPANY UPDATE Price (10 Oct 12, TRY) 8.92 Target price (TRY) (from 8.65) 11.35¹ Market cap. (TRY m) 4,460.00 Finally paying high dividends? Enterprise value (TRY m) 5,342.7 ■ We raise our TP from TRY8.65 to TRY11.35 and maintain our *Stock ratings are relative to the relevant country benchmark. Outperform rating. ¹Target price is for 12 months. ■ Tax hike discounted in the share price, in our view: The recent tax Research Analysts increase in autos could result in 2% lower FY12E EPS, on our volume Onur Muminoglu 90 212 349 0454 estimates. Assuming that the pass-through will take place in January 2013E, [email protected] we cut 4pp from our FY13E car market growth estimate and add 1pp to the high margin substitute LCV segment. The net impact to our 12M forward P/E is 1-2%, with the shares already underperforming by 5% since the tax-hike news. ■ Dividend season is coming: With the EURTRY staying below 2.35 as we enter 4Q12E, we think the chances of avoiding large FX losses on the FY12E statutory accounts (where Tofas’ distributable income was dependent on last year) is rising. Capex outlook remains low. As a result, we believe Tofas could be one of the highest dividend yield stocks under our coverage. ■ Becoming more defensive: Tofas has had a higher beta than other major Turkish cyclicals despite the fact that its take-or-pay export contracts have been securing c.73% of the installed capacity. The following attributes should improve Tofas’ defensive qualities, in our view: 1) we expect the start of high pay-outs next year (from FY12E earnings), 2) the export mix is diversifying (even assuming no US-exports) and 3) the capex outlook is much easier in the long term, in our view. ■ Catalysts: 1) We expect to hear more about the US-export project from December 2012 onwards (this is not a major short-term value driver to us, but should help diversify regional risks and provide long-term opportunities). 2) We expect 3Q12E IFRS results around the last week of October. ■ Valuation: We estimate a 10% FY12E dividend yield (+82% yoy) versus consensus at 7%.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 11 Revenue (TRY m) 7,336.7 7,364.3 7,961.2 8,619.7 9 EBITDA (TRY m) 752.72 851.18 877.78 905.94 7 Adjusted Net Income (TRY m) 514.1 521.9 498.8 520.5 CS adj. EPS (TRY) 1.03 1.04 1.00 1.04 5 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 0.99 1.01 1.15 Price Price relative ROIC (%) 14.53 14.51 14.14 15.55 P/E (adj., x) 8.68 8.55 8.94 8.57 The price relative chart measures performance against the IST P/E rel. (%) 64.5 74.6 87.1 93.9 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 7.4 6.3 6.0 5.5 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 0.91 IC (12/12E, TRY m) 3,014.39

Performance Over 1M 3M 12M Dividend yield (%) 10.2 EV/IC 1.8 Absolute (%) 2.1 12.3 26.0 Net debt (12/12E, TRY m) 882.7 Current WACC 12.6 Relative (%) 0.5 1.9 9.5 Net debt/equity (12/12E, %) 41.4 Free float (%) 24.0 BV/share (12/12E, TRY) 4.3 Number of shares (m) 500.00 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 39 15 October 2012

Tofas TOASO.IS Price (10 Oct 12): TRY8.92, Rating: OUTPERFORM, Target Price: TRY(from 8.65) 11.35 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 7,337 7,364 7,961 8,620 No. of shares (wtd avg) 500 500 500 500 EBITDA 753 851 878 906 CS adj. EPS (TRY) 1.03 1.04 1.00 1.04 Depr. & amort. (298) (348) (357) (365) Prev. EPS (TRY) — 0.99 1.01 1.15 EBIT (CS) 454 503 521 541 Dividend (TRY) 0.50 0.91 0.85 0.89 Net interest exp. 55 77 104 110 Dividend payout ratio 48.63 87.12 85.33 85.17 Associates — — — — Free cash flow per share (0.56) 0.96 1.07 1.30 Other adj, (2) 1 — 1 PBT (CS) 508 581 625 652 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (34) (76) (125) (130) valuation Profit after tax 474 505 500 522 Growth(%) Minorities — — — — Sales 14.5 0.4 8.1 8.3 Preferred dividends — — — — EBIT 30.0 10.8 3.5 3.8 Associates & other 40 17 (1) (1) Net profit 32.2 1.5 (4.4) 4.4 Net profit (CS) 514 522 499 521 EPS 32.2 1.5 (4.4) 4.4 Other NPAT adjustments (40) (17) 1 1 Margins (%) Reported net income 474 505 500 522 EBITDA margin 10.3 11.6 11.0 10.5 EBIT margin 6.2 6.8 6.5 6.3 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 6.9 7.9 7.9 7.6 EBIT 454 503 521 541 Net margin 7.0 7.1 6.3 6.0 Net interest 55 77 104 110 Valuation metrics (x) Cash taxes paid — — — — EV/sales 0.76 0.73 0.66 0.58 Change in working capital (554) (82) (45) (45) EV/EBITDA 7.4 6.3 6.0 5.5 Other cash & non-cash items 49 318 287 290 EV/EBIT 12.3 10.6 10.0 9.2 Cash flow from operations 5 816 867 897 P/E 8.7 8.5 8.9 8.6 CAPEX (287) (334) (333) (246) P/B 2.5 2.1 2.0 2.0 Free cash flow to the firm (282) 482 534 651 Asset turnover 1.2 1.1 1.1 1.2 Acquisitions — — — — ROE analysis (%) Divestments — — — — ROE stated-return on 27.1 25.8 23.2 23.4 Other investment/(outflows) 125 89 89 89 ROIC 14.5 14.5 14.1 15.5 Cash flow from investments (161) (246) (244) (157) Interest burden 1.1 1.2 1.2 1.2 Net share issue/(repurchase) — — — — Tax rate 6.7 13.1 20.0 20.0 Dividends paid (250) (250) (455) (426) Financial leverage 1.4 1.1 1.0 0.9 Issuance (retirement) of debt 683 (204) (100) (100) Credit ratios (%) Other (751) 130 45 45 Net debt/equity 63.1 41.4 35.3 22.4 Cash flow from financing (317) (324) (509) (480) Net debt/EBITDA 1.5 1.0 0.9 0.6 Effect of exchange rates — — — — Interest coverage ratio (8.2) (6.5) (5.0) (4.9) Changes in Net Cash/Debt (474) 247 114 259 . Net debt at start 656 1,129 883 769 Source: Company data, Thomson Reuters, Credit Change in net debt 474 (247) (114) (259) Suisse estimates. Net debt at end 1,129 883 769 510

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets 11 Cash and cash equivalents 1,332 1,389 1,403 1,562 Accounts receivable 962 1,509 1,631 1,766 9 Inventory 380 475 513 556 7 Other current assets 893 736 774 815 5 Total current assets 3,567 4,108 4,320 4,699 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 1,305 1,293 1,412 1,293 Price Price relative Intangible assets and goodwill 782 780 780 780 Investment securities — — — — Other assets 648 583 624 670 The price relative chart measures performance against the Total assets 6,302 6,764 7,136 7,441 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 678 714 772 839 Short-term debt 940 835 785 735 Other short term liabilities 1,126 1,425 1,520 1,628 Total current liabilities 2,744 2,974 3,077 3,202 Long-term debt 1,582 1,485 1,435 1,385 Other liabilities 187 173 446 580 Total liabilities 4,513 4,632 4,958 5,167 Shareholders' equity 1,789 2,132 2,178 2,274 Minority interest — — — — Total equity & liabilities 6,302 6,764 7,136 7,441 Net debt (TRY m) 1,129 883 769 510

Turkish Consumer 40 15 October 2012

Financial assumptions

■ We expect a 6% contraction in vehicle sales in Turkey this year, which is a more optimistic forecast than the mean guidance from major industry participants (9-10% contraction yoy).

■ The Turkish Car Dealers’ Association (ODD) raised its FY12E industry projection from 775,000-825,000 units to 800,000-850,000 on 5 September; however, it then cut the forecast by 1.2% to the 790,000-840,000 range in early October (-10% yoy, including heavy vehicles).

■ Despite a 12% yoy contraction in January-September, we expect a pick-up in yoy comps in 4Q, as: 1) the base effect will be more favourable (Figure 73); 2) we expect consumer loans to reflect the recent fall in the market interest rates better; 3) deposit rates offered by the banks (a key savings alternative for the Turkish consumer, hence a substitute for discretionary spending) better followed the declining market interest rates than the loan rates; and 4) all these positives are due when the high season for automotive demand is about to kick-off.

Figure 73: Turkish light vehicle sales units

160,000

140,000 Jan-Sep: 120,000 -12% yoy easing base-effect in the hi-season --> 100,000 The first yoy growth seen in Sep 80,000

60,000

40,000

20,000

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Range 2005-2010 2011 2012

Source: ODD

■ We are broadly in line with guidance on exports, assuming that management’s projections reflect the broad view of the order book for the rest of the four months of the year. The CEO has mentioned a better export outlook for 2H12E with the improving Euro-zone macro economy.

■ Despite the increasing diversity of the regional mix, the Euro-zone remains a key export zone for Turkish automotive makers. A recent recovery in the EUR/TRY should improve TRY revenue/vehicle.

■ Looking at EBITDA margins in Tofas might be a misleading indicator of profitability. This is because the pay compensations from take-or-pay export contracts generate comparable gross mark-ups with ‘takes’ but at lower revenues, inflating the gross margin. Instead, we look at profit per adjusted units sold, which is the sum of domestic sales and estimated take-or-pay allocation for the period.

■ There was significant progress in the balance sheet in 2Q, with net debt falling to 1.0x from 1.4x 12M-trailing EBITDA in 1Q. Part of it was driven by the W/C release (TRY346m), which was due to factoring the conversion of some related-party receivables.

Turkish Consumer 41 15 October 2012

Figure 74: Tofas – Credit Suisse forecasts versus consensus and 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 7,364 7,961 -13% 0% 8% 7,365 8,114 0% -2% EBITDA 851 878 4% 13% 3% 826 906 3% -3% Margin 11.6% 11.0% 11.2% 11.2% Reported net income 505 501 5% 7% -1% 469 518 8% -3% CS net income 522 499 -1% 2% -4% 469 518 11% -4% Source: Credit Suisse estimates, Thomson Reuters

Figure 75: Tofas: Blended valuation Figure 76: Tofas: Multiples-driven fair value in TRY/share, unless otherwise stated Fair EV/EBITDA P/E Weight Value 2012E 2013E 2012E 2013E DCF 50% 12.60 Target Multiples (x) 6.4 5.5 12.1 10.3 Growth adjusted multiples 50% 10.10 Amount (TRYm) 851 878 522 499 Target Price 11.35 Fair value (TRYm) 4,629 4,071 6,311 5,138 Current Price 8.92 Fair value per share (TRY) 9.3 8.1 12.6 10.3 Upside 27% Average (TRY/share) 10.1 Price as of 10 October 2012. Source: Thomson Source Credit Suisse estimates Reuters, Credit Suisse estimates

Figure 77: Tofas: DCF-driven fair value TRY in millions, unless otherwise stated 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Term Net sales 7,364 7,961 8,620 9,247 9,487 9,744 10,027 10,322 EBITDA 851 878 906 925 917 917 932 948 EBITDA margin 11.6% 11.0% 10.5% 10.0% 9.7% 9.4% 9.3% 9.2% EBIT 503 521 541 562 561 568 578 588 Tax rate 13% 20% 20% 20% 20% 20% 20% 20% Adjusted taxes (66) (104) (108) (112) (112) (114) (116) (118) NOPAT 438 417 433 449 449 454 462 471 Depreciation 348 357 365 364 356 350 354 359 Net capex (334) (333) (246) (185) (190) (292) (301) (206) Capex/sales -4.5% -4.2% -2.9% -2.0% -2.0% -3.0% -3.0% -2.0% Change in W/C (82) (45) (45) (43) (17) (20) (22) (23) FCF 369 396 507 586 599 492 493 600 8,398 Terminal growth - real 1.0% Terminal growth - nominal 5.0% PV 6,264 Net debt 759 Participations 22 Minorities - Implied market cap 5,527 Number of shares (m) 500 Implied equity value (TRY/share) 11.05 12M Target (TRY/share) 12.60 Upside Potential 41% Price as of 10 October 2012; Source: Company data, Credit Suisse estimates, Thomson Reuters

Turkish Consumer 42 15 October 2012

Figure 78: Peer map for TOASO

Source: Credit Suisse PEERs

Turkish Consumer 43 15 October 2012

Europe / Turkey Automobile Manufacturers

Ford Otosan (FROTO.IS) Rating NEUTRAL* COMPANY UPDATE Price (10 Oct 12, TRY) 18.30 Target price (TRY) (from 17.25) 18.95¹ Market cap. (TRY m) 6,421.65 2013E comes with risks and opportunities Enterprise value (TRY m) 7,350.6 ■ We raise our TP from TRY17.25 to TRY18.95 but maintain our Neutral *Stock ratings are relative to the relevant country benchmark. rating. ¹Target price is for 12 months. ■ We are largely maintaining our forecasts from our previous update (Ford Research Analysts Otosan - Transition started, published 31 August 2012) except for the Onur Muminoglu downward revision to our FY12E EBITDA by -6% following the recent tax 90 212 349 0454 hike in autos. Our higher TP reflects 1) the lower risk-free rate that we adopt [email protected] for all Turkish consumer names in this note and 2) higher peer multiples.

■ Tax-hikes on cars – c.1.4% earnings impact (FY12E): We do not think the fact that FROTO’s domestic EBITDA is highly geared to commercial vehicles makes it immune from the tax hikes in cars. Even though it is a small margin business for FROTO, the car segment is a volume driver and major contributor to domestic revenues. In this fragmented market, we believe FROTO will assume most of the additional tax burden until YE12E. Therefore, the earnings impact could be similar to that for Tofas. ■ 2013E transition? Improving IR efforts and recent guidance on the product reshuffling and the investment cycle helped improve 2012E-15E FCF visibility. Yet we believe the major 2013E transition will require perfect execution in stock management and marketing strategy (Figure 80). ■ Small interim dividends; big relief on 2013E: The TRY0.65 (gross) interim dividend announced for 4Q12E was 30% above our estimate. The company’s intention of sustaining high pay-outs even in a high-capex year is a strong signal to the rest of the capex cycle until 2014E. ■ Catalysts: 1) 3Q12E IFRS results expected around the last week of October; 2) the initial FY13E guidance toward YE12E; and 3) sales of the first new model coming out of a three-year investment programme are to be launched in October. ■ Valuation: The 12M forward consensus P/E is at a 20% discount to the Turkish equities average, in line with the historical two-year average of 22%.

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 21 Revenue (TRY m) 10,445.0 10,097.9 10,681.3 12,570.2 EBITDA (TRY m) 872.43 810.40 913.43 1,043.14 16 Adjusted Net Income (TRY m) 630.7 525.9 575.8 643.4 CS adj. EPS (TRY) 1.80 1.50 1.64 1.83 11 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 1.62 1.68 1.86 Price Price relative ROIC (%) 30.58 20.05 17.09 16.20 P/E (adj., x) 10.18 12.21 11.15 9.98 The price relative chart measures performance against the IST P/E rel. (%) 75.8 106.5 108.7 109.4 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 7.4 9.1 8.5 7.6 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 1.29 IC (12/12E, TRY m) 3,125.53

Performance Over 1M 3M 12M Dividend yield (%) 7.1 EV/IC 2.4 Absolute (%) 2.5 11.2 31.7 Net debt (12/12E, TRY m) 929.0 Current WACC 13.6 Relative (%) 0.9 0.8 15.2 Net debt/equity (12/12E, %) 42.3 Free float (%) 18.0 BV/share (12/12E, TRY) 6.3 Number of shares (m) 350.91 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 44 15 October 2012

Ford Otosan FROTO.IS Price (10 Oct 12): TRY18.30, Rating: NEUTRAL, Target Price: TRY(from 17.25) 18.95 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 10,445 10,098 10,681 12,570 No. of shares (wtd avg) 351 351 351 351 EBITDA 872 810 913 1,043 CS adj. EPS (TRY) 1.80 1.50 1.64 1.83 Depr. & amort. (146) (165) (189) (217) Prev. EPS (TRY) — 1.62 1.68 1.86 EBIT (CS) 727 645 725 826 Dividend (TRY) 1.65 1.29 1.45 1.49 Net interest exp. 71 (7) (25) (38) Dividend payout ratio 91.81 86.39 88.11 81.29 Associates — — — — Free cash flow per share 1.52 (0.72) 0.39 1.01 Other adj, 3 30 30 29 PBT (CS) 800 668 730 817 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (138) (19) (96) (163) valuation Profit after tax 662 649 634 654 Growth(%) Minorities — — — — Sales 36.5 (3.3) 5.8 17.7 Preferred dividends — — — — EBIT 26.2 (11.2) 12.4 13.9 Associates & other (31) (123) (58) (10) Net profit 27.4 (16.6) 9.5 11.7 Net profit (CS) 631 526 576 643 EPS 27.4 (16.6) 9.5 11.7 Other NPAT adjustments 31 123 58 10 Margins (%) Reported net income 662 649 634 654 EBITDA margin 8.4 8.0 8.6 8.3 EBIT margin 7.0 6.4 6.8 6.6 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 7.7 6.6 6.8 6.5 EBIT 727 645 725 826 Net margin 6.0 5.2 5.4 5.1 Net interest 71 (7) (25) (38) Valuation metrics (x) Cash taxes paid — — — — EV/sales 0.62 0.73 0.72 0.63 Change in working capital 83 (87) (82) (142) EV/EBITDA 7.4 9.1 8.5 7.6 Other cash & non-cash items 29 166 122 83 EV/EBIT 8.9 11.4 10.7 9.7 Cash flow from operations 910 717 741 729 P/E 10.2 12.2 11.2 10.0 CAPEX (377) (969) (603) (376) P/B 3.4 2.9 2.7 2.5 Free cash flow to the firm 532 (252) 138 353 Asset turnover 2.4 2.1 2.0 2.1 Acquisitions — — — — ROE analysis (%) Divestments — — — — ROE stated-return on 36.2 31.7 27.7 26.7 Other investment/(outflows) 51 (72) (46) (95) ROIC 30.6 20.0 17.1 16.2 Cash flow from investments (326) (1,041) (649) (472) Interest burden 1.1 1.0 1.0 1.0 Net share issue/(repurchase) — — — — Tax rate 17.2 2.8 13.2 20.0 Dividends paid (519) (579) (454) (507) Financial leverage 0.46 0.55 0.62 0.64 Issuance (retirement) of debt 240 394 250 150 Credit ratios (%) Other (365) (352) (265) (150) Net debt/equity 3.6 42.3 55.0 61.7 Cash flow from financing (644) (537) (470) (507) Net debt/EBITDA 0.1 1.1 1.4 1.5 Effect of exchange rates — — — — Interest coverage ratio (10.3) 90.7 29.4 22.0 Changes in Net Cash/Debt (61) (861) (378) (250) . Net debt at start 7 68 929 1,306 Source: Company data, Thomson Reuters, Credit Change in net debt 61 861 378 250 Suisse estimates. Net debt at end 68 929 1,306 1,556

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets Cash and cash equivalents 809 285 157 57 21 Accounts receivable 522 523 556 641 Inventory 725 674 732 861 16 Other current assets 1,034 988 1,040 1,174 11 Total current assets 3,089 2,470 2,485 2,734 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 1,108 1,917 2,569 2,789 Price Price relative Intangible assets and goodwill 29 21 21 21 Investment securities — — — — Other assets 196 304 304 304 The price relative chart measures performance against the Total assets 4,421 4,713 5,379 5,849 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 901 776 820 973 Short-term debt 227 336 461 536 Other short term liabilities 603 422 438 492 Total current liabilities 1,731 1,534 1,720 2,001 Long-term debt 650 877 1,002 1,077 Other liabilities 142 105 282 248 Total liabilities 2,523 2,517 3,003 3,326 Shareholders' equity 1,898 2,197 2,376 2,523 Minority interest — — — — Total equity & liabilities 4,421 4,713 5,379 5,849 Net debt (TRY m) 68 929 1,306 1,556

Turkish Consumer 45 15 October 2012

Figure 79: Credit Suisse estimate of FROTO Kocaeli plant’s transition period during capex cycle Capacity estimates in units per annum 2012E 2013E 2014E MODELS 2Q12A 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 1Q14E 2Q14E

START of SALES CUSTOM PRODUCTION LAUNCHED Capacity: 130,000 p.a.

END OF SALES FROM SALES FROM SALES FROM TRANSIT CONNECT PRODUCTION INVENTORIES INVENTORIES / IMPORTS Capacity: 110,000 p.a. IMPORTS

TRANSIT START OF NEW SALES Capacity: from 210,000 p.a. TRANSIT PROD. LAUNCHED to 160,000 p.a

START of SALES MINIVAN PRODUCTION LAUNCHED Capacity: 110,000 p.a.

TOTAL CAPACITY 320,000 vehicles per annum ------> 400,000 vehicles per annum

Source: Company data, Credit Suisse estimates Financial assumptions

■ We are not making any significant changes to our unit sales estimates since our recent revisions (FROTO.IS: Ford Otosan - Transition started, 31 August 2012).

■ We are in line with management’s guidance on FY12E unit exports. The visibility on FY13E exports is less clear, not only because the uncertainty on European cyclical demand continues, but also because of the execution of the new model launches and consumers’ reaction to them being critical. We expect a 5% yoy increase in FY13E exports but the recent EURUS$ is a good indicator for Turkish automakers’ commercial vehicle export track record, in our view (Figure 81).

Figure 80: FROTO – Sales breakdown (1H 2012A) Figure 81: EUR/US$ and Turkey’s commercial vehicle Units exports Others Other W.Europe 3% 1.70 600,000 9% monthly avg EURUS$ Eastern Europe 550,000 Turkey Turkey's commercial vehicle exports (3-mo MA) 3% Scandinavia 31% 1.60 3% 500,000 Russia 450,000 4% 1.50 France 400,000 5% 1.40 350,000 300,000 1.30 UK 250,000 15% N. America 200,000 1.20 Germany 18% 150,000 9% 1.10 100,000 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12

Source: Company data Source: Turkish Central Bank, OSD

■ Our long-term sales estimates imply a capacity utilisation of 85%, slightly below the 2011A-12E average of ~87%.

■ There are a few challenges for the operating margin outlook in the medium term.

■ Although long-term opex/sales should benefit from increasing scale, promotions during the phased launches of the new models could weigh on marketing costs until mid- 2014E.

Turkish Consumer 46 15 October 2012

■ FROTO will replace Connect production with a minivan model and Connect will turn into a low-margin import model in domestic sales. Although there will be an in-house manufactured minivan replacement, the size of the minivan market is smaller than the former (Figure 82). We expect a rising share of imports in FROTO’s domestic commercial vehicle sales post-investments, diluting the profit mix. We tend to project the long-term EBITDA margin below 10% at this stage.

Figure 82: Breakdown of Turkish light vehicle market in units, Jan-Jul 2012

300,000

250,000 high-margin segment for FROTO as mostly in-house production 200,000

150,000

currently captured by 100,000 Tofas-made vehicles

50,000

0 cars Mini vans Small vans Medium vans

others FROTO Source: ODD, Credit Suisse research

■ We are slightly ahead of consensus FY12E revenue forecasts, which we believe is due to our slightly more positive view on the domestic market compared to guidance. On the EBITDA margin, we are c50bps below consensus. The 1H12A EBITDA margin (7.9%) implies that FROTO has to run at a 9.1% margin in 2H12E in order to meet the consensus FY12E expectation (8.5%). The lagging impact of falling commodity prices and sequentially better mix (i.e. lower share of imports) should provide flexibility; however, we have not yet seen a material easing in the competitive landscape.

■ Our above-consensus (reported) net income estimate for FY12A is probably due to the lower effective tax rates in 1H12A, which we believe will be largely sustained this year. Although FROTO is a strong dividend stock, we think consensus will prioritise operational results over headline earnings when evaluating short-term quarterly financials.

Figure 83: FROTO – Credit Suisse forecasts versus consensus and 1H12A run-rate in TRY millions, unless otherwise stated CS estimate 1H12 2012E 2013E Consensus CS / Consensus 2012E 2013E yoy yoy yoy 2012E 2013E 2012E 2013E Revenues 10,098 10,681 -1% -3% 6% 10,194 11,143 -1% -4% EBITDA 810 913 0% -7% 13% 867 1,013 -7% -10% Margin 8.0% 8.6% 8.5% 9.1% Reported net income 649 634 0% -2% -2% 656 725 -1% -12% CS net income 526 576 0% -17% 9% n/a n/a n/a n/a Source: Credit Suisse estimates, Thomson Reuters

Turkish Consumer 47 15 October 2012

Figure 84: FROTO: Blended valuation Figure 85: FROTO: Multiples-driven fair value in TRY/share, unless otherwise stated Fair EV/EBITDA P/E Weight Value 2012E 2013E 2012E 2013E DCF 50% 21.10 Target Multiples (x) 6.8 5.8 12.7 10.8 Growth adjusted multiples 50% 16.80 Amount (TRYm) 810 913 649 634 Target Price 18.95 Fair value (TRYm) 4,550 3,950 8,223 6,834 Current Price 18.30 Fair value per share (TRY) 12.97 11.26 23.43 19.47 Upside 4% Average (TRY/share) 16.80 Price as of 10 October 2012. Source Credit Suisse estimates Source: Thomson Reuters, Credit Suisse estimates

Figure 86: FROTO: DCF-driven fair value in TRY millions, unless otherwise stated 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Term Net sales 10,098 10,681 12,570 14,193 14,570 14,965 15,376 15,814 EBITDA 810 913 1,043 1,197 1,224 1,254 1,285 1,327 EBITDA margin 8.0% 8.6% 8.3% 8.4% 8.4% 8.4% 8.4% 8.4% EBIT 645 725 826 981 1,010 1,041 1,073 1,107 regular tax rate 20% 20% 20% 20% 20% 20% 20% 20% Adjusted taxes (129) (145) (165) (196) (202) (208) (215) (221) Use of investment incentives 115 50 ------NOPAT 631 630 661 785 808 833 859 886 Depreciation 165 189 217 216 214 213 211 220 Net capex (969) (603) (376) (200) (200) (200) (200) (300) Capex/sales -9.6% -5.6% -3.0% -1.4% -1.4% -1.3% -1.3% -1.9% Change in W/C (87) (82) (142) (155) (37) (39) (41) (43) FCF (260) 134 360 645 785 807 829 763 10,238 Terminal growth - real 1.0% Terminal growth - nominal 5.0% PV 6,822 Net debt 333 Participations 4 Minorities - Implied market cap 6,494 Number of shares (m) 351 Implied equity value (TRY/share) 18.5 12M Target (TRY/share) 21.10 Upside Potential 15% Price as of 10 October 2012; Source: Thomson Reuters, Company data, Credit Suisse estimates

Turkish Consumer 48 15 October 2012

Figure 87: Peer map for FROTO

Source: Credit Suisse PEERs

Turkish Consumer 49 15 October 2012

Europe / Turkey Conglomerates

Koc Holding (KCHOL.IS) Rating (from Neutral) OUTPERFORM* UPGRADE RATING Price (10 Oct 12, TRY) 7.30 Target price (TRY) (from 6.81) 9.10¹ Market cap. (TRY m) 18,512.06 Attractive portfolio at a discount Enterprise value (TRY m) 23,027.6 ■ We upgrade our rating on Koc Holding to Outperform from Neutral and raise our TP to TRY9.10 from TRY6.81. *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. ■ NAV discount attractive again: We estimate a 15% NAV discount for the

Research Analysts holding company’s shares. The discount has moved in a tight range of 4% to Onur Muminoglu 16% since early 2011 and bounced back from lows three times in this period. 90 212 349 0454 ■ Disconnect with the share price and interest rates: Koc’s relative share [email protected] price generally moves higher in a falling interest rate environment. The Ates Buldur inverse correlation has not been present since May 2012 (Figure 89). 90 212 349 0459 [email protected] ■ YKB is our top pick among Turkish banks due to its attractive long-term Atinc Ozkan positioning in a low interest rate environment (good operating leverage and 90 212 349 0453 potential to improve the cost-income ratio). Credit Suisse analyst Ates Buldur [email protected] estimates Yapi Kredi will record the highest earnings growth (17%) among large cap Turkish banks in 2013 (Turkish Banks - What's next?, dated 9 October 2012). YKB is the largest NAV contributor to Koc with a 27% share. ■ Very large cash inflow from underlyings: In addition to FROTO, we expect Tofas and Arcelik to be among those with high dividend yields in Turkish equities next year. Tupras’ lucrative dividends go into the Special Purpose Vehicle (SPV) for the time being, but will potentially add >60% to Koc’s dividend income when the SPV’s debt retires in 2015E (unless Koc makes early payments). ■ Catalysts: 1) Final bids for the toll-road privatisations are due on 31 October; Koc has been prequalified in a three-member consortium. 2) Bids for the privatisation of natural gas distribution in the Ankara region are due in mid-December. 3) Koc’s energy division (in a JV structure) is looking at 3,000MW of generation capacity by 2017E from the current 302MW. 4) Tupras has been laggard within the NAV constituents; its strong 3QE results outlook might be a catalyst in our view (Figure 90). ■ Valuation: The current NAV discount (15%) is wider than the YTD average (11%).

Share price performance Financial and valuation metrics

Year 12/11A 12/12E 12/13E 12/14E 9 Revenue (TRY m) 75,740.9 84,383.9 87,795.4 99,885.5 8 EBITDA (TRY m) 6,373.64 6,411.79 6,849.42 7,869.96 7 Adjusted Net Income (TRY m) 2,124.5 2,064.9 2,247.0 2,683.6 6 CS adj. EPS (TRY) 0.88 0.83 0.89 1.06 5 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Prev. EPS (TRY) — 0.86 0.99 1.15 Price Price relative ROIC (%) 15.72 14.94 14.76 15.88 P/E (adj., x) 8.30 8.75 8.24 6.90 The price relative chart measures performance against the IST P/E rel. (%) 61.7 76.4 80.3 75.6 ULUSAL 100 IDX which closed at 67645.32 on 05/09/12 EV/EBITDA 3.7 3.6 3.3 2.8 On 05/09/12 the spot exchange rate was TRY2.29/Eu 1. - Eu .79/US$1 Dividend (12/12E, TRY) 0.20 IC (12/12E, TRY m) 28,918.44

Performance Over 1M 3M 12M Dividend yield (%) 2.8 EV/IC 0.80 Absolute (%) -0.8 7.7 9.5 Net debt/equity (12/12E, %) 18.5 Net debt (12/12E, TRY m) 4,515.5 Relative (%) -2.4 -2.8 -7.0 Number of shares (m) 2,535.90 Free float (%) 22.0 BV/share (12/12E, TRY) 6.1 Source: Company data, Thomson Reuters, Credit Suisse estimates.

Turkish Consumer 50 15 October 2012

Koc Holding KCHOL.IS Price (10 Oct 12): TRY7.30, Rating: (from Neutral) OUTPERFORM, Target Price: TRY(from 6.81) 9.10 Income statement (TRY m) 12/11A 12/12E 12/13E 12/14E Per share data 12/11A 12/12E 12/13E 12/14E Sales revenue 75,741 84,384 87,795 99,885 No. of shares (wtd avg) 2,415 2,476 2,536 2,536 EBITDA 6,374 6,412 6,849 7,870 CS adj. EPS (TRY) 0.88 0.83 0.89 1.06 Depr. & amort. (1,035) (1,189) (1,292) (1,432) Prev. EPS (TRY) — 0.86 0.99 1.15 EBIT (CS) 5,339 5,223 5,557 6,438 Dividend (TRY) 0.21 0.20 0.22 — Net interest exp. (790) 120 (116) (94) Dividend payout ratio 23.81 24.40 25.00 — Associates — — — — Free cash flow per share (0.68) 0.49 0.63 0.47 Other adj, 159 (408) (419) (450) PBT (CS) 4,707 4,935 5,022 5,894 Key ratios and 12/11A 12/12E 12/13E 12/14E Income taxes (857) (854) (1,004) (1,179) valuation Profit after tax 3,850 4,081 4,018 4,715 Growth(%) Minorities (1,726) (2,017) (1,771) (2,032) Sales 40.7 11.4 4.0 13.8 Preferred dividends — — — — EBIT 25.2 (2.2) 6.4 15.9 Associates & other — — — — Net profit 22.5 (2.8) 8.8 19.4 Net profit (CS) 2,124 2,065 2,247 2,684 EPS 22.5 (5.2) 6.2 19.4 Other NPAT adjustments — — — — Margins (%) Reported net income 2,124 2,065 2,247 2,684 EBITDA margin 8.4 7.6 7.8 7.9 EBIT margin 7.0 6.2 6.3 6.4 Cash flow (TRY) 12/11A 12/12E 12/13E 12/14E Pretax margin 6.2 5.8 5.7 5.9 EBIT 5,339 5,223 5,557 6,438 Net margin 2.8 2.4 2.6 2.7 Net interest (790) 120 (116) (94) Valuation metrics (x) Cash taxes paid — — — — EV/sales 0.31 0.27 0.25 0.22 Change in working capital (3,424) (524) (272) (1,093) EV/EBITDA 3.7 3.6 3.3 2.8 Other cash & non-cash items (1,389) (2,089) (1,901) (2,229) EV/EBIT 4.4 4.4 4.0 3.4 Cash flow from operations (264) 2,730 3,268 3,023 P/E 8.3 8.8 8.2 6.9 CAPEX (1,370) (1,507) (1,658) (1,824) P/B 1.2 1.2 1.1 1.0 Free cash flow to the firm (1,634) 1,223 1,610 1,199 Asset turnover 0.85 0.85 0.78 0.80 Acquisitions — — — — ROE analysis (%) Divestments — — — — ROE stated-return on 15.9 14.1 14.1 15.1 Other investment/(outflows) 511 511 511 511 ROIC 15.7 14.9 14.8 15.9 Cash flow from investments (859) (996) (1,146) (1,312) Interest burden 0.88 0.94 0.90 0.92 Net share issue/(repurchase) 10 10 10 10 Tax rate 18.2 17.3 20.0 20.0 Dividends paid (970) (951) (936) (982) Financial leverage 1.2 1.1 1.0 0.9 Issuance (retirement) of debt — — — — Credit ratios (%) Other (455) (455) (455) (455) Net debt/equity 21.2 18.5 14.3 12.1 Cash flow from financing (1,414) (1,395) (1,380) (1,426) Net debt/EBITDA 0.76 0.70 0.55 0.44 Effect of exchange rates — — — — Interest coverage ratio 6.8 (43.4) 47.8 68.8 Changes in Net Cash/Debt (2,537) 339 741 284 . Net debt at start 2,317 4,854 4,516 3,775 Source: Company data, Thomson Reuters, Credit Change in net debt 2,537 (339) (741) (284) Suisse estimates. Net debt at end 4,854 4,516 3,775 3,491

Balance sheet (TRY m) 12/11A 12/12E 12/13E 12/14E Assets 9 Cash and cash equivalents 10,066 10,405 11,146 11,430 8 Accounts receivable 7,055 7,860 8,178 9,578 7 Inventory 5,188 5,780 6,013 7,115 6 Other current assets 23,547 27,920 33,692 38,970 5 Total current assets 45,856 51,965 59,030 67,094 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Total fixed assets 10,781 11,099 11,465 11,857 Price Price relative Intangible assets and goodwill 4,911 4,911 4,911 4,911 Investment securities — — — — Other assets 27,590 31,595 36,911 41,756 The price relative chart measures performance against the Total assets 89,138 99,570 112,316 125,616 IST ULUSAL 100 IDX which closed at 69196.41 on 10/10/12 Liabilities On 10/10/12 the spot exchange rate was TRY2.33/Eu 1. - Eu .78/US$1 Accounts payable 7,077 7,950 8,230 9,639 Short-term debt 8,846 8,846 8,846 8,846 Other short term liabilities 39,214 47,079 57,340 66,347 Total current liabilities 55,138 63,876 74,416 84,831 Long-term debt 8,032 8,032 8,032 8,032 Other liabilities 3,042 3,259 3,528 3,811 Total liabilities 66,212 75,167 85,977 96,674 Shareholders' equity 14,119 15,173 16,666 18,805 Minority interest 8,807 9,230 9,673 10,137 Total equity & liabilities 89,138 99,570 112,316 125,616 Net debt (TRY m) 4,854 4,516 3,775 3,491

Turkish Consumer 51 15 October 2012

Figure 88: Koc: Historical NAV discount Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Jun-09 Jul-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 10%

-5%

-10%

-15%

-20%

-25%

-30%

-35%

-40%

KCHOL NAV premium annual avg

Source: Thomson Reuters, Company data, Credit Suisse research

Figure 89: Koc relative share price versus benchmark interest rates Koc relative stock price=100 January 2012, in TRY, unless otherwise stated

13.0% 150

12.0% 140

11.0% 130

10.0% 120 9.0%

110 8.0%

100 7.0%

6.0% 90 1/1/2010 5/1/2010 9/1/2010 1/1/2011 5/1/2011 9/1/2011 1/1/2012 5/1/2012 9/1/2012

Benchmark interest rates in Turkey KCHOL rel to ISE100

Source: Thomson Reuters, Credit Suisse research

Turkish Consumer 52 15 October 2012

Figure 90: Share performances in the last three months in TRY

30.0% 28.6% 24.0% 25.0%

20.0% 15.2% 13.5% 14.0% 13.1% 15.0% 11.6% 10.0% 8.4% 5.9% 6.4% 5.0%

0.0%

-5.0% -3.2% -10.0% -6.1%

-15.0% -15.2% -20.0% YKB TATKS TTRAK ARCLK MAALT TUPRS AYGAZ AYCES OTKAR KCHOL TOASO FROTO ISE-100

Source: Thomson Reuters

Turkish Consumer 53 15 October 2012

Figure 91: Koc Holding: Sum-of-the-parts valuation in TRY millions, unless otherwise stated Direct NAV Target NAV Current Value KOC HOLDING NAV stake Valuation to Koc Share Valuation Value* to Koc Share (%) (TRY m) (TRY m) (%) (TRY m) (TRY m) (%) Automotives Tofas 38% Market value 4,460 1,677 8% DCF, peers 5,675 2,133 8% Ford Otomotiv 38% Market value 6,422 2,470 11% DCF, peers 6,650 2,557 10% Otokar 45% Market value 994 444 2% Market value*(1+Ke) 1,093 488 2% T.Traktor 38% Market value 2,097 787 4% Market value*(1+Ke) 2,307 865 3% Otokoc 96% 0.3x 2011 P/S 665 640 3% 0.3x 2011 P/S*(1+Ke) 731 704 3% 6,017 28% 6,749 26% Consumer Durables Arcelik 41% Market value 6,703 2,715 13% Market value*(1+Ke) 8,447 3,421 13% Arcelik LG Klima 5% 0.5x 2011 P/S 311 16 0% 342 17 0% 2,730 13% 3,438 13% Financial Services Koc Financial Services 38% 82% of YKB 15,610 5,862 27% 82% x YKB target value 19,284 7,241 28% YKB Market value 19,083.6 23,518 Koc Consumer Finance 45% 1.5x 2011 P/BV 237 105 0% 261 116 0% 5,967 28% 7,357 29% Energy Enerji Yatirimlari 75% 51% of Tuprs less debt 4,192 3,144 15% 51% of Tuprs less debt 5,329 3,997 16% Tuprs Market value 10,267 DCF 12,496 Aygaz 41% Market value 2,370 964 4% Market value*(1+Ke) 2,607 1,061 4% 4,108 19% 5,057 20% Tourism Marmaris Altinyunus 37% Market value 85 31 0% Market value*(1+Ke) 93 34 0% Cesme Altinyunus 30% Market value 101 30 0% Market value*(1+Ke) 111 33 0% Other tourism 72 0% 88 0% 133 1% 155 1% Food & Retail Tat 44% Market value 340 148 1% Market value*(1+Ke) 374 163 1% Koctas 37% 9x 2011 P/EBITDA 882 327 2% 970 360 1% 476 2% 523 2%

Others 947 4% 947 4% CURRENT NAV TARGET NAV Listed group companies 18,272 84% 21,995 86% Unlisted group companies 2,108 10% 2,233 9% Solo net cash 1,273 6% 1,273 5% NAV 21,652 100% 25,500 100% Koc Holding - Market value 18,512 18,512 Premium/(Discount) to NAV -14.5% -27% Target premium(discount) to NAV -10% Target market capitalisation 22,950 Number of shares 2,536 Target share price (TRY) 9.10 Current share price (TRY) 7.30 Upside potential 25% * Credit Suisse target price estimates for Tofas, Ford Otomotiv, Arcelik, YKB and Tupras, ** Enerji Yatirimlari has c.US$600m debt and its core asset is 51% Tupras stake; Koc Financial Services (KFS) owns 82% of YKB Source: Thomson Reuters, Company data, Credit Suisse research

Turkish Consumer 54 15 October 2012

Companies Mentioned (Price as of 10 Oct 12) Anadolu Efes (AEFES.IS, TRY27.20, UNDERPERFORM, TP TRY27.00) Arcelik (ARCLK.IS, TRY9.92, OUTPERFORM, TP TRY12.50) BIM (BIMAS.IS, TRY73.00, NEUTRAL, TP TRY76.90) Carlsberg (CARLb.CO, DKr519.00, UNDERPERFORM, TP DKr430.00) Coca Cola Icecek (CCOLA.IS, TRY33.90, NEUTRAL, TP TRY37.20) Electrolux (ELUXb.ST, SKr162.70, OUTPERFORM, TP SKr190.00) Ford Otosan (FROTO.IS, TRY18.30, NEUTRAL, TP TRY18.95) Koc Holding (KCHOL.IS, TRY7.30, OUTPERFORM, TP TRY9.10) Migros (MGROS.IS, TRY19.25, OUTPERFORM, TP TRY23.75) SAB Miller Plc. (SAB.L, 2668 p, OUTPERFORM, TP 3,050.00 p) Tofas (TOASO.IS, TRY8.92, OUTPERFORM, TP TRY11.35) Tupras (TUPRS.IS, TRY41.00, OUTPERFORM, TP TRY49.90) Yapi Kredi Bank (YKBNK.IS, TRY4.39, OUTPERFORM, TP TRY5.41)

Disclosure Appendix Important Global Disclosures The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. As of October, 2 2012 Analysts’ stock rating are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10- 15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10- 15% levels in the Neutral stock rating definition, respectively. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight: The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 44% (53% banking clients) Neutral/Hold* 39% (48% banking clients) Underperform/Sell* 14% (43% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Turkish Consumer 55 15 October 2012

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Turkish Consumer 56 15 October 2012 Europe / Turkey Equity Research

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