Turkish Airlines

Turkish Airlines
Team ITU Research Partners
Tilbe Gizem Bircan
Alper Topkaya
Osman Öztekin
M. Çağhan Erayman
Erman Demir
Team Mentor
Tolga Kotan

0
2
4
6
8
10
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13
Target Price: TL 8.30
Current Market Price: TL 6.68
BUY
Investment Summary and Company Overview
Current Price
TL 6.68
Upside Potential
24%
Target Price
TL 8.30
Promising Aviation Market Ready to Benefit
Rising Profitability Further Improvement

Market Profile
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
Domestic Market Growth (mn)
30
40
50
60
70
80
90
2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
International Market Growth (mn)

Why BUY
WHY BUY ?
Aggressive
Growth
High Profit Yield
Potential
Compelling
Valuation
Further Growth
Potential

Aggressive Growth
Sales
Forecast
Temporal
Regression
Scenerio
Forecasts
Functional
Regression
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
4000
8000
12000
16000
20000
2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
Sales Revenue Sales Growth Rate
Sales Revenue (mn)
17% CAGR

Future Market Potential
0
10
20
30
40
50
60
70
80
90
100
2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
International Market Forecast
0
10
20
30
40
50
60
2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
Domestic Market Forecast
Pax (mn)
Aggressive Growth
Market GrowthHigh Sales Revenue Growth
Pax (mn)

Aggressive Growth
0
10
20
30
40
50
60
70
2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
PAX ( mn )
70%
75%
80%
85%
0
40
80
120
160
200
2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
ASK RPK Load Factor
Traffic Data ( mn )
Market GrowthHigh Sales Revenue Growth
THY
Aviation Figures

Why BUY
Aggressive
Growth Rate
High Profit Yield
Potential
Accurate
Valuation
Promising
Potentials
WHY BUY ?

3.9 4.0 3.9 3.8
4.0 3.9
4.1
3.5
2
4
6
2006 2007 2008 2009 2010 2011 9M'11 9M'12
Personnel/ASK
($ Cent)
Effective Personel Cost Management
High Profit Yield Potential
0
4
8
SAS DL UA AF-KL LH AY IAG LAN SQ* TK
Personel/ASK
($ Cent)
Benefical AffiliatesEffective Cost Hub-to-Point & Youngest Fleet Age

‘’Optimum Supply Chain Management’’

6.5
12.7
10
13
9.7
0
4
8
12
16
20
TA LH AF BA KLM
Hub-to Point Strategy Youngest Fleet Age

Benefical Affiliates High Profit Expectations
Income Statement ( Margin ) 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
EBITDAR 22.3% 20.2% 22.9% 16.6% 14.0% 16.9% 16.4% 16.6% 17.5% 17.0% 16.9%
EBITDA 17.9% 16.8% 17.5% 11.0% 9.8% 13.7% 13.5% 13.9% 15.0% 14.8% 14.9%
EBIT 10.4% 12.1% 10.9% 5.5% 2.9% 7.8% 7.5% 8.1% 9.2% 8.8% 8.9%
Net Income (NI) 5.5% 18.5% 8.0% 3.4% 0.2% 6.7% 6.8% 6.8% 7.7% 7.3% 7.3%
2%
4%
6%
8%
10%
12%
7%
9%
11%
13%
15%
17%
10
11
12E
13E
14E
15E
16E
17E
EBITDA EBIT
0.0
0.2
0.4
0.6
0.8
1.0
1.2
7
8
9
10
11
12E
13E
14E
15E
16E
17E
Hub-to-Point & Youngest Fleet Age

Why BUY
Aggressive
Growth Rate
High Profit Yield
Potential
Compelling
Valuation
Further Growth
Potential
WHY BUY ?

Further Growth Potential
3rd Airport
 150 mn. Passenger Capacity
 First phase in 2016
Merger with LH : All is possible
 Second biggest airline company
 Impressive hub network
 Economy of scale
 Increasing bargaining power
Further Growth Potential

Weighted Calculation DCF Multiples
Target Price of THYAO
TL 8.30
DCF
( Discounted Cash Flow)
Peer Comparison
(P/E, EV/EBITDA, EV/EBITDAR)
Long Term Drivers Short Term Drivers
65% 35%
Compelling Valuation
TL 8.10 TL 8.67

DCF Components
TL 8.10
5- Year Projected
Cash Flows
TL 2.42
Terminal Value of
Cash Flows
TL 5.68
Cost of Equity
WACC 6.5 %
Cost of Equity 9.0 %
Terminal Value
g
2.0 %
(1970-2012*)
High Correlation with GDP growth.

P/E EV/EBITDA
2012 E 2013 E 2012 E 2013 E
Grand Average of Aviation Market 11.8 (x) 10.3 (x) 7.9 (x) 7.6 (x)
Turkish Airlines 8.1 (x) 6.5 (x) 7.7 (x) 6.8 (x)
Discount Rate -31% -37% -7% -25%
Current Price TL 6.68
Target Price TL 9.73 TL 10.53 TL 7.16 TL 8.33

Potential Risks
Fuel Price Volatility
Airport Capacity
Currency Exchange Rate
Increasing Competitiveness
Impact
Probability
High
High
Risks Factors
Swap and Option Based Derivatives
New Airport with 150 Million Passenger
Capacity
Natural Hedging
Cost Advantage by using Group Strategy
Shields for Risk Factors

Potential Risks
Sensitivity of Risk Factors
Source: Team’s Estimates
0%
2%
4%
6%
8%
10%
12%
14%
1% Load Factor 1% Pax Yield 1% Currency 1% Oil 1% Staff
EBITDAR EPS

Potential Risks
Monte Carlo
0
0.5
1
1.5
2
2.5
3
3.5
4
Buy
78%
Hold
17%
Frequency
Price (TA Group)
Sell
5%
DCF Price Target Sensitivity to
“g 2 %”

Conclusion
Summary of Claim
Ready for Market Penetration
Attractive Valuation
High Profit Position
Strong Market Growth
24 % Upside Potential

Table of Appendices
Appendix 1: Income Statement
Appendix 2: Balance Sheet
Appendix 3: Statement of Cash Flow
Appendix 4: Income Statement (Vertical Analysis)
Appendix 5: Balance Sheet (Vertical Analysis)
Appendix 6: Key Financial Ratios
Appendix 7: Multiple Peer Valuation
Appendix 8: Discounted Cash Flow (FCFF) Valuation
Appendix 9: Sensitivity of EBITDAR and EPS
Appendix 10: Regression Based Forecasts
Appendix 11: Regression Based Forecasts
Appendix 12: Scenerio Based Forecast
Appendix 13: SWOT Analysis
Appendix 14: Subsidiaries and Affiliates
Appendix 15: Utilization of Affiliates
Appendix 16: Risk Assesment
Appendix 17: Revenue and PAX Structure
Appendix 18: Company’s Cost Per ASK
Appendix 19: Corporate Governance and Social Responsibility
Appendix 20: Annual GDP Growth Expectations
Appendix 21: Aviation Factor Estimations

Income Statement
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Income Statement (In Millions $) 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Total Revenues 3734 4718 4556 5440 7019 8388 9708 11311 12980 15522 18670
Cost of Sales & Service -2326 -3117 -2817 -3694 -5030 -5789 -6660 -7799 -8831 -10688 -12827
Fuel Cost -904 -1427 -990 -1406 -2395 -2812 -3311 -3852 -4340 -5100 -6237
Personnel Cost -782 -909 -782 -1141 -1339 -1384 -1602 -1866 -2129 -2794 -3267
Other Cost -640 -781 -1045 -1147 -1296 -1594 -1748 -2081 -2362 -2794 -3323
Gross Profit 1408 1601 1739 1746 1989 2599 3048 3512 4149 4834 5843
Operating Expense -574 -647 -694 -845 -1004 -1184 -1371 -1597 -1852 -2223 -2668
EBITDAR 834 954 1045 901 986 1414 1678 1915 2297 2611 3175
Rental Expense -164 -162 -249 -305 -296 -268 -283 -303 -325 -338 -373
EBITDA 670 792 796 596 690 1146 1394 1612 1972 2273 2802
Depr. & Amort. -281 -221 -301 -297 -486 -496 -573 -661 -744 -925 -1107
EBIT 389 571 495 299 204 650 821 951 1229 1348 1695
Other Income 166 -118 -25 13 -141 47 47 47 47 47 47
Others Operating Income 174 44 57 91 95 154 178 207 238 284 342
Others Operating Expenses -8 -162 -82 -79 -236 -95 -109 -128 -145 -175 -210
Non- Operating Income (Financial Related) -270 553 8 -75 27 0 0 0 0 0 0
Earnings Before Taxes (EBT) 285 1006 478 237 89 698 868 998 1276 1395 1742
Tax Expenses -81 -132 -115 -51 -76 -140 -174 -200 -255 -279 -348
Net Income (NI) 204 874 363 185 13 558 695 799 1021 1116 1394
Source: Team’s Estimates and Company’s Annual Report

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Balance Sheet
Balance Sheet 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Cash and Equivalents 412 334 724 526 820 1258 1456 1697 1947 2328 2800
Net Trade Receivables 211 231 295 374 403 525 543 702 727 991 1064
Inventory 97 65 99 111 133 178 180 239 236 339 351
Other Current Assets 557 1103 740 1247 799 1246 1327 1413 1505 1603 1707
Total Current Assets 1277 1733 1858 2258 2155 3208 3507 4051 4415 5261 5922
Net Fixed Assets 2777 3343 3195 4168 5873 6668 7646 7823 8161 9003 9666
Other Long Term Assets 173 156 639 462 657 1065 1602 2165 2801 3627 4537
Total Long Term Assets 2950 3499 3834 4630 6530 7733 9248 9988 10962 12630 14203
Total Assets 4227 5232 5692 6888 8685 10941 12755 14039 15376 17891 20125
Short-Term Lease Obligations 193 277 274 319 418 487 538 580 611 689 776
Trade Payables 313 288 371 476 529 703 805 949 1067 1301 1551
Other Liabilities 513 529 648 848 1144 1292 1429 1588 1747 1974 2238
Short Term Liabilities 1019 1094 1293 1643 2091 2482 2772 3117 3425 3963 4564
Long Term Lease Obligations 1347 1850 1711 2384 3771 5026 5840 5962 5949 6785 6999
Other Liabilities 274 313 400 437 440 454 470 489 510 535 560
Long Term Liabilities 1621 2163 2111 2821 4211 5481 6310 6451 6459 7320 7559
Total Liabilities 2640 3257 3404 4464 6302 7963 9082 9567 9884 11283 12123
Shareholders' Equity & Capital 151 116 581 647 635 672 672 672 672 672 672
Other Components of Equity 1436 1859 1707 1777 1748 2306 3001 3799 4820 5936 7330
Total Shareholders' Equity 1587 1975 2288 2424 2383 2978 3673 4471 5492 6608 8002
Total Liab. & SHE 4227 5232 5692 6888 8685 10941 12755 14039 15376 17891 20125

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Statement of Cash Flow
Cash Flow Statement 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Cash flow from Operation 368 884 914 1313 1233 1941
Net Income 558 695 799 1021 1116 1394
Depreciation 496 573 661 744 925 1107
Trade Receivables -122 -18 -159 -25 -264 -73
Inventory -45 -2 -59 4 -103 -12
Trade Payables 174 102 145 117 234 250
Other Operating Act. -693 -465 -472 -547 -675 -725
Cash flow from Investing -1291 -1551 -837 -1082 -1767 -1770
Net CAPEX -1291 -1551 -837 -1082 -1767 -1770
Fixed Asset -795 -978 -176 -338 -842 -663
Cash flow from Financing 1361 865 163 19 914 301
Short Term Lease 69 52 41 31 78 87
Long Term Lease 1255 813 122 -13 836 214
Issue of Stock 37 0 0 0 0 0
Net Cash Change 438 198 240 250 381 472
Beginning Cash 820 1258 1456 1697 1947 2328
Ending Cash 1258 1456 1697 1947 2328 2800

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Income Statement (Vertical Analysis)
Income Statement 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Total Revenues 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%
Cost of Sales & Service -62,3% -66,1% -61,8% -67,9% -71,7% -69,0% -69,6% -69,6% -68,4% -69,4% -69,9%
Fuel Cost -24,2% -30,2% -21,7% -25,8% -34,1% -33,5% -34,1% -34,1% -33,4% -32,9% -33,4%
Personnel Cost -20,9% -19,3% -17,2% -21,0% -19,1% -16,5% -16,5% -16,5% -16,0% -17,5% -17,5%
Other Cost -17,1% -16,6% -22,9% -21,1% -18,5% -19,0% -19,0% -19,0% -19,0% -19,0% -19,0%
Gross Profit 37,7% 33,9% 38,2% 32,1% 28,3% 31,0% 30,4% 30,4% 31,6% 30,6% 30,1%
Operating Expense -15,4% -13,7% -15,2% -15,5% -14,3% -14,1% -14,0% -13,9% -14,1% -13,7% -13,2%
EBITDAR 22,3% 20,2% 22,9% 16,6% 14,0% 16,9% 16,4% 16,6% 17,5% 17,0% 16,9%
Rental Expense -4,4% -3,4% -5,5% -5,6% -4,2% -3,2% -2,9% -2,7% -2,5% -2,2% -2,0%
EBITDA 17,9% 16,8% 17,5% 11,0% 9,8% 13,7% 13,5% 13,9% 15,0% 14,8% 14,9%
Depr. & Amort. -7,5% -4,7% -6,6% -5,5% -6,9% -5,9% -5,9% -5,8% -5,7% -6,0% -5,9%
EBIT 10,4% 12,1% 10,9% 5,5% 2,9% 7,8% 7,5% 8,1% 9,2% 8,8% 8,9%
Other Income 4,5% -2,5% -0,5% 0,2% -2,0% 0,6% 0,5% 0,4% 0,4% 0,3% 0,2%
Others Operating Income 4,7% 0,9% 1,3% 1,7% 1,4% 1,8% 1,8% 1,8% 1,8% 1,8% 1,8%
Others Operating Expenses -0,2% -3,4% -1,8% -1,5% -3,4% -1,1% -1,1% -1,1% -1,1% -1,1% -1,1%
Non- Operating Income (Financial Related) -7,2% 11,7% 0,2% -1,4% 0,4% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Earnings Before Taxes (EBT) 7,6% 21,3% 10,5% 4,3% 1,3% 8,3% 8,0% 8,5% 9,6% 9,1% 9,2%
Tax Expenses -2,2% -2,8% -2,5% -0,9% -1,1% -1,7% -1,6% -1,7% -1,9% -1,8% -1,8%
Net Income (NI) 5,5% 18,5% 8,0% 3,4% 0,2% 6,7% 6,4% 6,8% 7,7% 7,3% 7,3%

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Balance Sheet (Vertical Analysis)
Balance Sheet 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Cash and Equivalents 9,7% 6,4% 12,7% 7,6% 9,4% 11,5% 11,6% 12,5% 13,1% 13,5% 14,5%
Net Trade Receivables 5,0% 4,4% 5,2% 5,4% 4,6% 4,8% 4,4% 5,2% 4,9% 5,8% 5,5%
Inventory 2,3% 1,2% 1,7% 1,6% 1,5% 1,6% 1,5% 1,7% 1,6% 2,0% 1,9%
Other Current Assets 13,2% 21,1% 13,0% 18,1% 9,2% 11,4% 10,4% 10,1% 9,8% 8,9% 8,4%
Total Current Assets 30,2% 33,1% 32,6% 32,8% 24,8% 29,3% 28,0% 29,5% 29,4% 30,1% 30,2%
Net Fixed Assets 65,7% 63,9% 56,1% 60,5% 67,6% 61,0% 59,4% 55,1% 52,4% 49,7% 47,5%
Other Long Term Assets 4,1% 3,0% 11,2% 6,7% 7,6% 9,7% 12,6% 15,4% 18,2% 20,1% 22,3%
Total Long Term Assets 69,8% 66,9% 67,4% 67,2% 75,2% 70,7% 72,0% 70,5% 70,6% 69,9% 69,8%
Total Assets 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%
Short-Term Lease Obligations 4,6% 5,3% 4,8% 4,6% 4,8% 4,4% 4,2% 4,1% 4,0% 3,8% 3,8%
Trade Payables 7,4% 5,5% 6,5% 6,9% 6,1% 6,4% 6,5% 7,0% 7,2% 7,6% 8,2%
Other Liabilities 12,1% 10,1% 11,4% 12,3% 13,2% 11,8% 11,3% 11,5% 11,6% 11,3% 11,3%
Short Term Liabilities 24,1% 20,9% 22,7% 23,9% 24,1% 22,7% 22,1% 22,7% 22,8% 22,7% 23,3%
Long Term Lease Obligations 31,9% 35,4% 30,1% 34,6% 43,4% 45,9% 45,8% 42,4% 38,6% 37,6% 34,4%
Other Liabilities 6,5% 6,0% 7,0% 6,3% 5,1% 4,2% 3,7% 3,5% 3,3% 3,0% 2,7%
Long Term Liabilities 38,3% 41,3% 37,1% 41,0% 48,5% 50,1% 49,5% 45,9% 41,9% 40,6% 37,1%
Total Liabilities 62,5% 62,3% 59,8% 64,8% 72,6% 72,8% 71,6% 68,6% 64,7% 63,3% 60,4%
Shareholders' Equity & Capital 3,6% 2,2% 10,2% 9,4% 7,3% 6,1% 5,3% 4,8% 4,4% 3,7% 3,3%
Other Components of Equity 34,0% 35,5% 30,0% 25,8% 20,1% 21,1% 23,1% 26,6% 30,9% 33,0% 36,3%
Total Shareholders' Equity 37,5% 37,7% 40,2% 35,2% 27,4% 27,2% 28,4% 31,4% 35,3% 36,7% 39,6%
Total Liab. & SHE 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

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Key Financial Ratios
Key Financial Ratio 2007 2008 2009 2010 2011 2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Liquidity Ratios
Current Ratio (x) 1,3 1,6 1,4 1,4 1,0 1,3 1,3 1,3 1,3 1,3 1,3
Cash Ratio (x) 0,4 0,3 0,6 0,3 0,4 0,5 0,5 0,5 0,6 0,6 0,6
Quick Ratio (x) 1,2 1,5 1,4 1,3 1,0 1,2 1,2 1,2 1,2 1,2 1,2
Efficiency Ratios
Inventory Turnover (x) 24,0 38,5 34,4 35,1 41,1 37,2 37,2 37,2 37,2 37,2 37,2
Fixed Asset Turnover (x) 1,3 1,4 1,4 1,3 1,2 1,9 2,0 2,4 2,6 2,6 2,7
A/R Turnover (x) 19,2 21,3 17,3 16,3 18,1 18,1 18,2 18,2 18,2 18,1 18,2
Average Collection Period (days) 18,7 16,9 20,8 22,1 19,9 20,2 20,1 20,1 20,1 20,2 20,1
Average Payment Period (days) 30,3 32,8 35,1 31,4 30,2 44,0 44,1 44,1 44,1 44,0 44,1
Total Asset Turnover (x) 0,9 0,9 0,8 0,8 0,8 0,8 0,8 0,8 0,8 0,8 0,8
Debt Ratios
Debt Ratio (%) 62% 62% 60% 65% 73% 73% 71% 68% 64% 63% 60%
Debt to Equity (x) 1,7 1,6 1,5 1,8 2,6 2,7 2,5 2,1 1,8 1,7 1,5
Equity Multiplier (x) 0,4 0,4 0,4 0,4 0,3 0,3 0,3 0,3 0,4 0,4 0,4
Long-Term Debt Ratio 0,4 0,4 0,4 0,4 0,5 0,5 0,5 0,5 0,4 0,4 0,4
Profitability Ratios
Gross Profit Margin (%) 37,7% 33,9% 38,2% 32,1% 28,3% 31,0% 31,4% 31,0% 32,0% 31,1% 31,3%
EBIT Margin (%) 10,4% 12,1% 10,9% 5,5% 2,9% 7,7% 8,5% 8,4% 9,5% 8,7% 9,1%
EBITDA Margin (%) 17,9% 16,8% 17,5% 11,0% 9,8% 13,7% 14,4% 14,3% 15,2% 14,6% 15,0%
EBITDAR Margin (%) 22,3% 20,2% 22,9% 16,6% 14,0% 16,9% 17,3% 16,9% 17,7% 16,8% 17,0%
Net Prof. Margin (%) 5,5% 18,5% 8,0% 3,4% 0,2% 6,7% 7,2% 7,1% 7,9% 7,2% 7,5%
RoA (%) 5,5% 18,5% 6,7% 2,9% 0,2% 5,7% 5,9% 6,0% 6,9% 6,7% 7,3%
RoE (%) 12,8% 44,3% 15,9% 7,6% 0,6% 24,2% 23,2% 21,0% 21,2% 18,8% 19,0%

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Multiple Peer Valuation
EV/EBITDA P/E EV/EBITDAR
2012 E 2013 E 2012 E 2013 E 2013 Target
Developed Market Carriers
Air Canada 4,5 4,2 7,2 6,1
Air FRANCE-KLM 8 6,4 - -
Air New Zealand 5,6 5,4 19,4 9,3
Lufthansa 4,5 4,1 - 12,6
Qantas Airways 4,1 3,3 - -
Average 5,3 4,7 13,3 9,3
Emerging Market Carriers
Air China 9,7 8,2 14,8 12,1
Cathay Pacific 10,9 8,3 - -
China Airlines 16,4 11 - 15,2
China Eastern Airlines 7,4 6,6 9,7 8,1
China Southern Airlines 7,9 6,2 15,6 9,9
EVA Airways 6,9 4,8 - 10,6
Korean Air 9,5 9,5 - -
Average 9,8 7,8 13,4 11,2
Low Cost Carriers
EasyJet 7,7 9,3 7,5 9,2
Ryanair 9,2 11,1 10,2 12,3
AirAsia 9,1 10,2 8,6 9,3
Average 8,7 10,2 8,8 10,3
Grand Average / Target (EBITDAR) 7,9 7,6 11,8 10,3 6
Turkish Airlines 7,7 6,8 8,1 6,5 5,6
Discount Rate -7% -25% -31% -37% -14%
Current Price 6,68 6,68 6,68 6,68 6,68
Target Price 7,16 8,33 9,73 10,53 7,63
Weighted Target Price 8,68

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2012 F 2013 F 2014 F 2015 F 2016 F 2017 F
Terminal
Value
EBIT 650 821 951 1229 1348 1695
Tax Eff. 0,2 0,2 0,2 0,2 0,2 0,2
NOPAT 520 657 761 983 1078 1356
Depreciation 496 573 661 744 925 1107
CAPEX -1291 -1551 -837 -1082 -1767 -1770
Change in Working
Capital
-224 203 72 192 89 449
Free Cash Flow To Firm -499 -118 657 837 326 1141 16542
Discount Factor 0,94 0,88 0,83 0,78 0,73 0,69
DCF -469 -104 544 651 238 783 11351
Perpetuity Growth Rate 0,02
Market Value of Firm 12995
MV of Debt 7504
Market Value of Equity 5491
No of Shares Outstanding 1200
Target Price ($) 4,58
Currency 1,77
Target Price (TL) 8,10
Discounted Cash Flow (FCFF) Valuation

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Regression Based Forecasts
Sales Forecast
Temporal
Regression
Scenerio
Forecasts
Functional
Regression
20%
16% 16%
15%
19%
20%
10%
20%
12 E 13 E 14 E 15 E 16 E 17 E
Weighted Sales Forecast
Team Estimate The Base

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Regression Based Forecasts

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Scenario Based Forecast
18% 19%
13%
10%
14%
18%
-5%
5%
15%
25%
35%
12 E 13 E 14 E 15 E 16 E 17 E
Scenerio Sales Forecast
Team Estimate The Worst The Base The Best
Lack of hub capacity. First phase of new airport launched.

SWOT ANALYSIS
Strengths Weaknesses
1. Impressive Flight Network 1. Airport Insufficiency
2. Innovative Marketing Strategies 2. High Leasing Expenses
3. Young Fleet 3. Lack of Scale
4. Affiliates and Subsidiaries
5. Government Support
Opportunities Threats
1. Growth of The Economy 1. Volatile Costs
2. International and Domestic Market Expansion 2. Threats of Potential Entrants
3. Increasing Air Transportation Usage 3. Substitution of Products
4. Instruction of New Airports 4. Currency Shifts
5. Government's Effective International Economy Policy 5. Political Risks
Source: Team’s Estimates and Institutions & Research Papers
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Source: Company’s Data
Subsidiaries and Affiliates
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Utilization of Affiliates
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Source: Marsh
Risk Assestment
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87%
8%
4% 1%
Split By Revenue
PAX Cargo Charter Other
60%
14%
13%
8%
5%
International Pax Breakdown
Europe Middle East Far East Africa America
Revenue and PAX Structure
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7.5
8.0
9.0
7.2
7.9
8.5
8.9
7.9
3.9 4.0 3.9 3.8 4.0 3.9
4.1
3.5
2.1 2.2
3.1
1.8
2.2
3.0 3.1
3.0
1.5
1.9 2.0
1.6 1.8 1.7 1.7
1.5
0
1
2
3
4
5
6
7
8
9
10
2006 2007 2008 2009 2010 2011 9M'11 9M'12
Cost Per ASK ( $ cent )
CASK Personnel/ASK Fuel/ASK Others/ASK
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Annual GDP Growth 2011 to 2031
7.1
6.5
4.6
4.4
4.3
4.1
3.9
3.4
3.2
2.8
2.6
1.9
1.3
0 1 2 3 4 5 6 7 8
South Asia
China
Asia Pacific
Africa
Southeast Asia
Latin America
Middle East
CIS
World
Ocenia
North America
Europe
Norheast Asia
Source: HIS Global Insight
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2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
Pax (m) 25,1 29,1 32,6 39 45,4 51,3 54,7 60,1 67,8
Pax Growth (%) 11% 16% 12% 20% 18% 12% 7% 10% 13%
Load Factor (%) 70,9% 73,7% 72,6% 77,7% 78,6% 78,8% 79,2% 77,6% 77,4%
ASK (bn) 56,6 65,1 81,2 96,1 110,3 127 142,1 166,9 196,6
ASK growth (%) 22% 15% 25% 18% 15% 15% 12% 17% 18%
RPK (bn) 40,1 47,9 58,9 74,6 86,2 102 117,2 141,5 171,2
RPK growth (%) 17% 19% 23% 27% 16% 18% 15% 21% 21%
Source: Team’s Estimates and Company Data
Aviation Factor Estimations
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Years Central Bank of Turkey OECD Fitch
2013 E 4,0% 4,2% 3,8%
2014 E 5,0% 5,2% 4,5%
2015 E 5,0% 5,5% 5,0%
2016 E - 5,6% 5,0%
2017 E-2030 E - 4,1% -
GDP Growth Forecasts Between 2013-2017
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Number of Aircrafts Between 2013-2017
Years 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E
Our Expected 100 127 133 158 179 202 220 232 239 256 280
Company's
Expected
100 127 133 158 179 200 214 224 234 240 232

EV/EBITDAR
Accurate Valuation
0
2
4
6
8
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 E
EV/EBITDAR multiple Previous Years
Target 6x
Turkish
Airlines
5,6
Discount Rate -14%
Target Price 7,63

Cost Comparison
0
4
8
12
16
20
SAS DL UA AF-KL LH AY IAG LAN SQ* TK
CASK Fuel/ASK
7.5
8.0
9.0
7.2
7.9
8.5
8.9
7.9
2.1 2.2
3.1
1.8
2.2
3.0 3.1
3.0
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 9M'11 9M'12
CASK Fuel/ASK
Cost Per ASK
($ Cent)
($ Cent)

Turkish Airlines

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