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Hellenic Petroleum

A look ahead at 2019 after strong Q3 beat

Update | Oil & gas | 19 Nov 2018

Hellenic Petroleum (ELPE) demonstrated exceptionally strong margin over-performance ($7.3/bbl) versus the benchmark in Q318, with group adjusted EBITDA at EUR 237m beating Reuters consensus by 11%. Key drivers included high availability, normalised operations and advantageous crude selection. We see several moving parts affecting benchmark margins in 2019, including highly anticipated changes to marine fuel standards (IMO 2020), crude price volatility, Iranian crude sanctions and associated waivers, as well as c 2mmbd of new global refining capacity additions. ELPE’s bias towards middle-distillate yield ensures that it is well placed to take advantage of increased demand for low sulphur shipping fuels and to remain competitive versus emerging competition. Our blended P/E, EV/EBITDA and DCF based valuation moves from EUR 9.0/share to EUR 8.9/share, with FY19e adjusted EBITDA reduced by 6% combined with a sector de-rating. ELPE’s forecast FY19 dividend yield (6.0%) remains supportive, with the potential for a one-off cash return on receipt of DESFA sales proceeds in Q418.

Hellenic Petroleum

Q2 beat driven by refining over-performance

Flash note | Oil & gas | 31 Aug 2018

Hellenic Petroleum reported Q2 adjusted EBITDA of EUR 187m, 14% ahead of market consensus and an 18% decrease y-o-y. Realised margins at $10.6/bbl represent $5.8/bbl over-performance relative to the benchmark, partly offsetting a reduction in utilisation due to planned maintenance at Elefsina and Thessaloniki, increased CO2 costs and a stronger euro. Management sees significant improvement in benchmark margins in Q318 providing visibility of continued momentum in refining profitability through 2018. In addition, a high middle distillate yield provides Hellenic with a competitive position ahead of new bunkering fuel specifications. Edison’s blended P/E, EV/EBITDA and DCF valuation stands at EUR 9.0/share, FY18e adjusted EBITDA at EUR 789m and we expect a projected 4.9% dividend yield (excluding incremental returns from DESFA proceeds expected in Q418) to provide share price support.

Hellenic Petroleum

Lower benchmark margins and FX affect Q1

Flash note | Oil & gas | 01 Jun 2018

Hellenic Petroleum reported Q4 adjusted EBITDA of €149m, a 35% decrease y-o-y but 1% ahead of consensus. This reduction was primarily due to lower benchmark margins (down 16% y-o-y), a weaker US$ (down 16% y-o-y) and an increase in CO2 costs. Refining sales volume at 4,102m metric tonnes, record utilisation and margin over performance of 5.7$/bbl partly mitigated these negatives. Our blended P/E, EV/EBITDA and DCF valuation stands at €9.0/share and we expect a projected 4.9% dividend yield to provide share price support.

Hellenic Petroleum

Refining estimates and valuation

Update | Oil & gas | 17 Apr 2018

A recovery in benchmark margins in February and March 2018 will offer relief to investors after a crude oil rally compressed margins in Q417. In this note, we adjust our forecasts to mark to market for Q118, while reflecting the anticipated positive margin impact of shipping regulatory changes in late 2019 and 2020. Longer term, European refining overcapacity remains a concern with capacity growth exceeding product demand growth – OPEC expects Europe to account for c 51% of projected global refinery closures in the period 2018–2020. ELPE remains well placed to weather the storm, given recent investments enhancing complexity and middle-distillate yield; however, competition from marginal refineries is likely to remain a drag on benchmarks. Our updated blended P/E, EV/EBITDA and DCF valuation stands at EUR 9.0/share, down from EUR 9.3/share. We expect a projected 4.3% dividend yield to provide share price support, with the potential for an increased one-off shareholder return in the event of receipt of DESFA sale proceeds in 2018.

Hellenic Petroleum

Q4 strong ops performance, weaker margins

Flash note | Oil & gas | 23 Feb 2018

Hellenic Petroleum reported Q4 adjusted EBITDA of EUR 170m, a 20.9% decrease y-o-y, 7.7% below our Q417 estimates. This reduction was primarily due to lower benchmark margins partly offset by strong operational performance with refining utilisation at 111% (input over nominal capacity), exports (+12%) and a 14% increase in domestic marketing net sales driven by aviation and bunkering. FY17 adjusted EBITDA growth was strong at +14% with record production (15Mt) and sales (16.1Mt). Our last published valuation, using a mix of 2018e P/E, EV/EBITDA and DCF metrics, stands at EUR 9.3/share.

Hellenic Petroleum

A refined Mediterranean player

Initiation | Oil & gas | 29 Jan 2018

Hellenic Petroleum (ELPE) owns three refineries (accounting for 65% of total Greek refinery output), while having a substantial marketing and chemicals presence. Although we believe the European refining market to be challenging in the long term, short-term regulation changes (on sulphur in 2020) should support demand for products from complex, middle distillate-focused refineries like Hellenic’s. The cyclical macro environment will likely present challenges but ELPE has a strong balance sheet and should generate free cash flow in the coming years, which may be usefully deployed. We use a mix of 2018e P/E, EV/EBITDA and a longer-term DCF approach to value ELPE at EUR 9.3/share, representing c 9% upside to the current share price.