MOL – Oilfield Investment Improves Balance-Sheet Ratios
MOL stock in recent months has been held back by a persistent shrinkage in petrochemical margins even though, as a reminder, Petchem accounts for just about 14% of the Company's yearly EBITDA ? a proportion which ensures a limited impact on the consolidated financials. What is more, the worsened outlook for MOL's Petrochemical business is more than offset by an improved outlook for Consumer Services in combination with the planned investment in the ACG oil field complex based in the Azerbaijan sector of the Caspian Sea, which, in our view can create value for shareholders and grow MOL's market capitalization by 9%. We still see MOL as a more compelling bet than most of its CEE competition owing to a well-balanced business mix (a 50-50 split between Upstream and Downstream) and relatively cheap earnings multiples at 4.9x 2020E EV/LIFO EBITDA and 4.5x 2021E earnings. Further, even with capital-intensive projects lined up for the next two years, we are confident MOL can deliver on the goal of a steady rise in base annual DPS. We maintain an accumulate rating for MOL after raising the target price slightly from HUF 3,258 to HUF 3,302 per share.
Magyar Olaj-Es Gazipari is an integrated oil and gas enterprise based in Hungary and active in central and eastern Europe. Co.'s core activities include: exploration and production of crude oil, natural gas and gas products; refining, transportation, storage and distribution of crude oil products in both retail and wholesale markets; importation, transportation, storage and wholesale trading of natural gas and other gas products; and the production and sale of olefins and polyolefins. TVK, the petrochemical affiliate of Co., is an olefin and polyolefin producer in Hungary.
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