BUY (L/T) MARKETPERFORM (S/T)

Akcansa announced TRL46mn net earnings for 2Q12, slightly above our
estimate of TRL42mn (Consensus: TRL40mn), on TRL65mn EBITDA (EFGI:
TRL60mnL286mn revenues (EFGI: TRL275mn slight earnings outperformance was enabled
by yoy increased revenues on higher-than-expected exports, as well as
somewhat wider margins. 

Domestic sales up by 5% yoy at TRL235mn -- The yoy rise in domestic
revenues was supported by the price hikes as of Apr’12, which resulted
in 10-15% yoy higher prices. Yet, volumes remained anaemic throughout
the quarter, as underlined in Heidelberg Cement’s 2Q presentation
(Akcansa is Heidelberg Cement’s sole operation in Turkey), where the
weakness in Turkish cement volumes was underscored. We estimate
Akcansa’s sales volumes to have contracted by 5-10% yoy within 2Q12.
Note that April-May cement data published by Turkish Cement
Manufacturers’ Association has indicated 8% yoy slippage in cement
volumes in northwest Turkey, which is consistent with our estimate. We
attribute the lower volumes yoy to the slowdown in the housing market
and lack of infrastructure investments in the region. Given the
softer-than-expected domestic volumes, which are counterbalanced by
exports, we fine-tune our domestic volume growth estimate from 2% to
0% for 2012.     

Exports up 24% yoy at TRL54mn -- 9-10% yoy higher export volumes and a
weaker TRL against the US$ yoy paved the way for higher exports yoy as
of 2Q12. Thanks to milder weather conditions in Russia qoq and the
buoyant demand ahead of the Sochi Winter Olympics to be held in 2014,
Akcansa enjoyed both higher volumes and slightly higher cement prices.
We expect a similar exports performance for 3Q12, driven by strong
demand in Russia, which replaces North African markets, where demand
has been lacklustre lately.       

Strong margins beating both consensus and our estimate -- Higher
prices yoy, lower petrocoke costs yoy, and the installation of the
waste heat recovery unit set the stage for 195mn. 

Net/Net

We continue to favour Akcansa, given its notable 2Q results and
attractive multiples of 2013E 5.1x EV/EBITDA and 8.0x P/E, at 37% and
34% respective discounts to international peers and at par with our
cement coverage. We maintain our L/T BUY and S/T MARKETPERFORM
ratings, with TRL10.0/share target price, implying 31% upside
potential. Note that we cut our target price slightly from
TRL10.30/share, as we have pared back our domestic volume forecasts
for YE12 and reflected the revisions to our macro forecasts.