OMV Petrom confirmed at HOLD, TP RON 0.34 - Facing the brunt of depressed crude oil prices
Petrom has a strong exposure to upstream production, which, under normal market conditions would generate more than half of its clean CCS earnings (i.e. 62% in 2019, ca. 60% on average over 2015-19). In 2020e we expect Petroms clean earnings from oil and gas production to decline by ca. 90%, having an overall contribution of only 16% to 2020e consolidated earnings. Still, we reckon that 2020 should be more the exception than the rule, hence we expect stronger oil prices and a normalisation of motor fuel consumption in 2021e and beyond. Although Petrom is well equipped to sustain current headwinds, having a strong balance sheet and a healthy liquidity, persisting uncertainties regarding oil and gas price developments, but also the ultimate impact of Covid-19 on motor fuel consumption, made us remain neutral on the stock. Consequently, we confirm our HOLD recommendation with a new DCF-derived 12m target price of RON 0.34, ca. 25% below the old target price of RON 0.45.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
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