Hellenic Petroleum - A flexible refiner in a challenging time
Despite continued low benchmark refinery margins during H220 due to the impact of COVID-19 on oil products demand, Hellenic Petroleum was able to maintain high production levels and generate substantial positive operating margin thanks to the flexibility of its refining system and increased exports. We anticipate a potentially slower recovery of benchmark margins in 2021 than previously assumed due to continued sluggish demand, at least during H121. However, with Greece looking to prioritise tourism with reduced restrictions on travel, we anticipate this could accelerate a recovery in domestic demand, especially for jet and road fuels. We have updated our estimates and valuation to reflect the Q420 results and peer multiples, and include a contribution from the recently announced 204MW Kozani PV project. Our valuation is unchanged at €6.55/share, representing 13% upside to the current share price.Hellenic Petroleum operates in the energy sector predominantly in Greece and the Balkans. Co.'s main activities include: refining and marketing of oil products ("R&M"); exploration, development and production, of hydrocarbons ("E&P"); manufacturing and marketing of petrochemical products; and power generation and trading. Refining, supply and trading are Co.'s core business and its main source of income and profit. Retail trading activities are split into domestic, comprising Co.'s Greek subsidiaries EKO and Hellenic Fuels, and International through local in-market retail subsidiary companies. Hydrocarbon exploration and production (E&P) Co. activities relate to Greece and abroad.
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