Tupras (TUPRS TI) - Weak results in 1Q19: Maintain Hold
Tupras’ 1Q19 net loss of TRY375m was worse than our loss estimate of TRY278m and RT consensus loss estimate of TRY261m due to a tax expense of TRY52m (BNPPe: TRY0m) and higher than expected financial expenses. 1Q19 EBITDA of TRY789m was 13% above our estimate of TRY700m due to higher inventory gains (vs. market consensus of TRY668m). Clean EBITDA of TRY550m was roughly in-line with our estimate of TRY518m. As expected, Tupras’ discouraging 1Q19 performance was due to compressed heavy crude differentials, maintenance of Residuum Upgrade Project (RUP) units and higher energy costs. Backed by a 15% increase in crude oil prices, Tupras booked an inventory gain of TRY301m (vs. BNPPe of TRY241m).
We lowered our 12M TP by 1% to TRY136.07 on narrower crude differentials, despite weaker TRY forecasts against USD. Although we believe Tupras is a top beneficiary of the IMO 2020 sulphur cap regulation, backed by a high quality products basket and high complexity, we think the associated strong prospects are priced in.
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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