MOL - FY CCS EBITDA Guidance Surpassed, 2020 Guidance Unchanged But Refinery Volatility Remains

MOL - Instant Earnings Comment

Recommendation: Accumulate (unch.)

Target price (12-month): 3400 (unch.)

Current share price: HUF 2,660

 

FY CCS EBITDA guidance surpassed, 2020 guidance unchanged but refinery volatility remains

 

• Summary:
  • MOL beat the Q4 CCS EBITDA consensus significantly (+11%) but due to one – off items (impairments and provision in a total extent of HUF 28bn) missed the bottom-line by ca. 29%. Better than expected CCS EBITDA arrived from better gas midstream +5.3bn +31%; Upstream +4.2bn +5%; CS +3bn +10%; +corp & intersegment +5 +50% compared to the consensus. FY EPS arrived to HUF 316 per share, excluding one-offs HUF 359 per share.
  • Since FY CCS EBITDA guidance slightly surpassed the lifted guidance of USD 2.4 billion (in Q3 management increased the guidance by USD 0.1 billion) by 2% and reached USD 2.44 billion, one may expect a special dividend though at a small extent. However, given the uncertainty on the macro side, mgmt may prefer to postpone the decision about the special dividend until the board meeting (end of march) to have more visibility on this year’s trends.
  • Management kept its FY CCS EBITDA guidance for 2020 at USD 2.5 billion, but cautioned that “2020 may bring more uncertainty and volatility”.
  • All in all, Q4 CCS EBITDA result is very impressive (significantly beat the consensus + 11%), however there were a few one-off (impairment and provisions) that worsen the total picture especially if we take a look at the profit that plummeted by 53% (y-o-y). We believe that investor should concentrate on cash flows (OCF followed CCS EBITDA) rather than the one-off squeezed profit therefore we rather expect positive market reaction. On the other hand, management also highlighted the uncertain macro environment brought by the outbreak of coronavirus. So far there has not been any indication of special dividend despite the overachievement of CCS EBITDA guidance, but confirmed the base dividend increase. A rational explanation for that could be that mgmt. wait a few months to decide about the special dividend (board meeting in March and AGM in April) to have better visibility on the macro trends.