Tupras (TUPRS TI) - Challenging outlook persists: Maintain Hold
Based on our updated macro assumptions (including 100bp higher risk-free rate of 14%) and higher indebtedness, we lower our 12M TP for Tupras by 2% to TRY82.65 and maintain our HOLD rating. We expect mediocre cash generation to continue in 4Q20 due to narrowed crude differentials and muted crack margins. Despite expecting a strong recovery by 2021, we find the upside potential to be unattractive, as the stock trades at 6.3x 2021E EV/EBITDA, implying a 39% premium to its European peers
Tupras posted net loss of TRY420m in 3Q20, better than BNPPe loss of TRY901m and RT consensus loss estimate of TRY592m. The bottom-line benefitted from better than expected operational profitability, despite the higher than expected financial expenses. 3Q20 EBITDA came in at TRY883m (vs BNPPe of TRY204m and RT consensus of TRY647m). It booked higher than expected inventory gain of TRY1.44b in 3Q20 (vs BNPPe: TRY1.09b inventory gain). CCS EBITDA (adjusted for FX items and inventory gain) of (-)TRY463m overshot our estimate of (-)TRY886m, mainly due to higher than expected gasoline and diesel yields.
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.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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