Company Report-Koton (Tacirler Yatırım )

Poised for Growth with New Store Openings and E-Commerce Momentum
We are initiating coverage on Koton with a 12-month target price of TL30.00,
implying a 94% upside potential and an BUY recommendation. Key catalysts
include: i) the company’s wide product range and competitive pricing
strategy in an attractive sector, ii) potential to increase market share through
new store openings both domestically and internationally, iii) acceleration in
e-commerce operations supporting margins, iv) an efficient supply chain.
Affordable Fashion Backed by International Expansion… Koton is one of
Turkey's leading fashion retailers with a multi-channel structure (retail, ecommerce, and wholesale). As the second-largest brand in women’s apparel in
Turkey, Koton also ranks among the top three in men’s and children’s categories.
With a strong focus on women’s products, the company offers a wide range of
items - including tops, bottoms, dresses, accessories, denim, and swimwear - at
affordable prices. Koton operates through stores and online channels in over 70
countries and plans to open 130 to 150 new stores by 2028, in addition to its
current 451 stores. Growth is expected to be largely driven by international
markets such as the GCC (Gulf Cooperation Council) countries, Central and Eastern
Europe, the CIS (Commonwealth of Independent States), and Africa. Accordingly,
the share of international operations in total revenue is projected to rise from 30%
to 40% in the medium term, while e-commerce is expected to grow from 11% to
above 15% of total sales. Given the company’s current and target markets, we
expect a notable acceleration in international store openings in the coming period.
Growth will likely be driven particularly by the expansion in international retail
space and the continued momentum in e-commerce. In this context, we forecast
35% revenue growth and 34% EBITDA growth in Turkish Lira terms for Koton in
2025.
Omnichannel Strategy Supported by E-Commerce Growth… As digitalization
continues to reshape the retail landscape, Koton’s omnichannel structure provides
the company with a significant competitive edge. In response to post-pandemic
trends, Koton has increased its investments in e-commerce, expanded its customer
reach, and doubled the share of e-commerce in total revenues from 6% to 12%
over the past five years. E-commerce penetration in Koton’s key markets -
particularly Turkey - still lags behind more developed markets such as the U.S.,
Germany, and the U.K., offering significant room for growth. As of 2024, retail, ecommerce, and wholesale accounted for 82%, 12%, and 6% of total revenues,
respectively. Koton’s Turkish e-commerce platform, koton.com, launched in 2015,
reached 77 million visits in 2022, while the revamped mobile app further enhanced
the user experience in the same year. Through its international expansion strategy,
the company has grown its revenues sixfold in USD terms over the past five years.
We believe there remains significant potential to raise the share of e-commerce
revenues to levels comparable with both global and local peers. While a slowdown
in consumer spending poses a short-term risk, we expect Koton’s operational
performance to remain resilient in the medium to long term, supported by a
gradual recovery in demand and easing pricing pressures.
Risks… Koton may be adversely affected by several factors including exchange rate
volatility, sharp increases in production costs and minimum wage, weakening
purchasing power, supply chain disruptions, and periods of intense competition
that could exert pricing pressure

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