Orlen: it’ll be great when it’s finished (stays BUY)

We maintain our BUY rating on Orlen, with an updated price target (PT) of PLN 90.3 (from PLN 83.2 previously), offering upside of 38.9%. With the combined weight of multiple balance sheets, Orlen is planning to invest PLN 320bn until 2030E. Upstream, refining, petrochemicals and retail should all get their share of the largesse but the biggest change will be in the power sector. Here, we expect two offshore windfarms to be completed by the end of the decade, two gas-fired power plants by 2025E, and even a small modular nuclear power plant from Orlen’s JV by 2030E. We expect the power business to provide a third of the group EBITDA by the end of the decade. Orlen is setting off on this journey with zero net debt, high oil and gas prices, and very strong refining margins generating strong cash flows, just when they are needed. To keep us all interested in the meantime, it has a progressive dividend policy with the possibility of special dividends. We expect a yield of 6-7% over the next three years. Orlen trades at 3.1x P/E for 2024E, compared to 5.7x for its peers, but we believe changes in the market perception of the company-specific risks could decrease the discount in the coming months.