Hellenic Petroleum - Q2 beat driven by refining over-performance
Hellenic Petroleum reported Q2 adjusted EBITDA of €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 €9.0/share, FY18e adjusted EBITDA at €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 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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