Tupras (TUPRS TI) - 2Q19 indicates a solid outlook: Maintain Buy
Tupras posted NI of TRY870m in 2Q19, higher than BNPPe of TRY664m and RT consensus estimate of TRY544m. The deviation came from inventory gains and higher deferred tax gain (2Q19: TRY305m vs. BNPPe: TRY200m). 2Q19 EBITDA of TRY1.4b was 14% higher than the BNPPe of TRY1.2b (RT consensus: TRY1.3b) due to higher inventory gains of TRY675m (BNPPe: TRY264m) during the second quarter. Despite weaker refining dynamics (52% q-q plunge in med-complex margin and narrower heavy crude differentials) and RUP maintenance longer by 12 days, CCS EBITDA (adjusted for FX items and inventory gain) surged by 36% q-q to USD140m (+49% in TRY terms to TRY820m) in 2Q19.
We expect cash generation to strengthen further, backed by the completion of RUP maintenance and supportive refining dynamics. We believe Tupras is a top beneficiary of the IMO 2020 sulphur cap regulation, supported by a high-quality product basket and the high complexity of its refining assets. The stock trades at 39% discount on 2020E EV/EBITDA multiple compared to its global peer average.
Turkiye Petrol Rafinerileri is an energy and refining company based in Turkey. Co. is engaged in providing and refining crude oil, the importing and exporting of oil products, and establishing and operating refineries in Turkey and foreign countries. Also, Co. is establishing and operating factories and facilities in the petrochemical industry. Co. is engaged in purchasing, selling, importing, exporting, storing, marketing and distributing (wholesale, retail, foreign and domestic) all kinds of petroleum products, LPG and natural gas. Co. runs its business through the refineries in Izmit, Izmir, Kirikkale and Batman.
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