Mediterranean Refining: Losing the appetite for consumption (Motor Oil Hellas stays BUY, Hellenic Petroleum and Tupras downgraded to HOLD)
In this report, we curb our enthusiasm for the refining sector, based on our belief that oil prices have started to hurt demand. We are not predicting a meltdown, but we have revised down our benchmark margin expectation for 2019E by USD 1.0/barrel to USD 9.0/barrel. With lower demand, the 3m bpd of global capacity added in 2018E and 2019E starts to look more important, in our view. Combined with major upgrade projects, we see a market that is better supplied with fuels. There is even a local Turkish project, STAR, which should be competing with all three companies by the year-end. An unfamiliar story is emerging, the Turkish market now looks a lot less attractive than its Greek neighbour, where growth is a welcome new friend. After a shaky 2019E, we expect IMO 2020 to deliver bumper margins in 2020E. We maintain our BUY rating on Motor Oil Hellas (12M price target (PT) of EUR 25.64, 17.4% upside); and downgrade Hellenic Petroleum from Buy to HOLD (12M PT EUR 8.12, 8.3% upside), over margin issues and privatisation uncertainty, and Tupras from Buy to HOLD (12M PT TRY 146.9, 12.4% upside), on worries over a Turkish slowdown and currency problems.Autohellas is a Hertz national franchisee. Co. is engaged in the rent-a-car segment, comprising of renting (short-term lease) and fleet management (long-term lease and fleet management) in Greece, Bulgaria, Cyprus, Romania, Serbia and Montenegro. Renting covers the needs of both individuals and companies for occasional, small duration rentals up to 1 year long.
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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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