PKN Orlen: there can be only one (stays BUY)
As the new PKN Orlen (PKN) arises from the fusion of Poland’s largest energy companies, we maintain our BUY recommendation, with an updated price target (PT) of PLN 83.2 (from PLN 88.5), offering upside of 32.5%. Despite rising rates and slowing demand, PKN continues to benefit from a slew of benign sector factors which underpin prices and margins across its many business sectors. We see gas prices remaining at historically high levels, but well below the pain threshold of 2022. Oil prices may fall in 2023E but still to not exactly low levels. Refining margins continue to be boosted by sanctions on Russia and the previous loss of refining capacity. Even in petrochemicals, where commodity margins have shrunk, PKN’s margins remain healthy. We expect PLN 250bn in investments in the next 10 years, but this means a substantially bigger, more profitable company. Upgraded refineries, new petrochemicals plants, higher upstream production volumes and new power plants should result in steady earnings growth. PKN trades at 5.5x P/E for 2023E, compared to 5.9x for its peers.Polski Koncern Naftowy Orlen's activities are divided into three main business segments: the Refining Segment that comprises crude oil processing as well as wholesale and retail trade in refinery products. The Petrochemical Segment that encompasses production and sale of petrochemicals and chemicals. The Retail Segment that comprises of sales at petrol stations. Co.'s basic products include gasolines, diesel oils, light heating oil, Jet fuel, liquid gas, polyetylene, polypropylene, benzene, butadiene, acetone, phenol, glycols, toluen, ortoxylene.
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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