Optima on HELLENiQ ENERGY: 3Q23e preview | A strong quarter on favorable refining environment; Positive 4Q23e outlook

HELLENiQ ENERGY || BUY | Target Price EUR: 9.20 | CP: EUR 7,06

3Q23e preview | A strong quarter on favorable refining environment; Positive 4Q23e outlook

3Q23e results preview | HELLENiQ ENERGY is scheduled to report its 3Q23e results tomorrow, after the close of the market, with a conference call scheduled also for tomorrow at 18.00 local time (Tel nos: Greek participants: +30 213 009 6000 or +30 210 94 60 800, UK participants: +44 (0) 800 368 1063, UK & International: +44 (0) 203 059 5872, USA participants: +1 516 447 5632).

  • Excluding inventory effect and one-offs, we expect “adjusted” EBITDA of EUR 353m (-30% y-o-y on tough comparables and higher by 115% q-o-q) and “adjusted” net profits of EUR 183m from EUR 381m in 3Q22. Accounting for the positive impact from inventory and other one-offs of EUR 60m, IFRS EBITDA are seen at EUR 413m, up by 26% y-o-y (also on tough comparables) and net income at EUR 252m unchanged y-o-y.

3Q/9M23e Group Key P&L Estimates

EUR m

3Q22

3Q23e

y-o-y

Consensus

Optima vs. Consensus

9M22

9M23e

y-o-y

IFRS EBITDA

329

413

26%

 

 

1,568

813

-48%

“Adjusted” EBITDA*

504

353

-30%

349

1%

1,137

921

-19%

refining

433

288

-33%

 

 

     944

769

-19%

marketing

51

50

-2%

 

 

     124

95

-23%

petchems

8

10

25%

 

 

       58

37

-36%

RES/other

12

5

-58%

 

 

       11

21

91%

IFRS Net Income*, **

252

252

0%

 

 

1,121

414

-63%

“Adjusted” Net Income*

381

183

-52%

192

-5%

755

460

-39%

Source: Optima bank, the Company      

Estimates are provided by the Company and are compiled based on the contribution from 10 brokerage firms (including Optima)

Divisional Performance | Turning to divisional performance (note that the Aspropyrgos refinery was down for maintenance a couple of weeks in September)), we expect the stronger q-o-q refining environment (well above the mid cycle levels) mainly driven by the wider cracks and to lesser extent to crude discounts, to support the segmental profitability during the quarter (with the combined benchmark refining margin at $ 12.7/bbl in 3Q23, well above the $7.7/bbl reported in 3Q22 and also the $4.5/bbl reported in 2Q23), and consequently to more than offset the negative impact from the maintenance on utilization rates.

Regarding currency movements, there was a considerable negative impact due to the weaker y-o-y $ vis-a-vis the EURO (average EUR/USD rate at 1.09 in 3Q23 vs. 1.01 in 3Q22 and 1.09 in 2Q23). That said, we see refining EBITDA adj. at EUR 288m (vs. EUR 433m a year ago and EUR 114m in 2Q23), while marketing contribution is expected flattish y-o-y (also aided by inventory gains from products stocked in the retail network) at EUR 50m, on solid demand for gasoline and diesel.

With regards to Petchems, we expect the weak environment during the quarter to weigh on segmental profitability, with the EBITDA contribution seen at EUR 10m, vs. EUR 8m last year. Finally, we estimate RES EBITDA of EUR 11m from the 340MW installed capacity (following the acquisition of 55MW wind parks in Mani in July) to largely offset the EUR 6m loss towards the E&P activity.

Drivers | In our view, the tight demand/supply dynamics will continue in the following quarters, allowing the refining environment to remain above the mid-cycle levels. That said, we expect that HELLENiQ ENERGY is on track for another strong year and in line with our latest EBITDA estimates of EUR c1.18bn for 2023e, and consequently we reiterate our ‘Buy’ recommendation. 

Other P&L | Further down the P&L, assuming depreciation expenses of EUR 80m, increased financial expenses of EUR 32m, losses from participations of EUR 5m (mainly ELPEDISON) and an effective tax rate at 22%, “adjusted” group net income stands at EUR 183m (IFRS net income at EUR 252m). In 9M23e terms, we see group adj. EBITDA and adj. Net profits at EUR 921m and EUR 460m respectively, while accounting for the expected inventory losses of EUR 88m, IFRS EBITDA and Net profits land to EUR 813m and EUR 414m respectively.

Conference Call: Finally, we expect the mgmt to provide a detailed analysis on 3Q23 performance as well us an updated outlook for 2023 during Thursday’s Conference Call.

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