Tupras (TUPRS TI) - Waiting for Godot: Downgrading to Hold
Tupras posted a 3Q19 net loss of TRY155m, in-line with our loss estimate of TRY150m but lower than RT loss estimate of TRY108m. 3Q19 EBITDA of TRY885m came above our estimate of TRY689m and RT of TRY646m on higher adjusted CCS EBITDA in 3Q19. Accordingly, CCS EBITDA almost doubled to TRY1.6b (vs. our estimate of TRY1.3b) in 3Q19 on better diesel cracks, the completion of RUP maintenance and higher than expected utilization rate of 105% (vs. BNPPe: 100%). However, the NI generation was curbed by higher financial expenses.
Based on narrowed heavy crude differentials and weak black product pricing (especially bitumen) amid IMO 2020 regulation change, we cut our SoTP based TP by 31% to TRY138.5 and downgrade our call on Tupras to HOLD. We believe that current risk/reward profile is unappealing as the stock trades at 9.0x 2019E EV/EBITDA multiple, implying 21% premium to its peers. Meanwhile, our 2019E dividend yield of 3% is much below its 10-year historical average of 8%.
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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