Last close As at 05/08/2026
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Research: Energy & Resources
Hellenic Petroleum has presented its updated strategy, which involves accelerating the energy transition aimed at a significant reduction in CO2 emissions and spending up to €2bn on clean-energy projects by 2030 to drastically decarbonise its activities. Q121 results were negatively affected by lower domestic oil demand amid the COVID-19 pandemic-driven lockdown. We expect Hellenic will benefit from an increase in demand for transport fuels as the restrictions are gradually lifted in Q221 and with Greece opening for tourists in May. We have updated our estimates to reflect Q121 results. Our valuation is up 6% to €6.91/share, implying a 10% potential upside, as we move to FY22e peer group multiples.
Written by
Hellenic Petroleum |
On the path towards decarbonisation |
Strategy update |
Oil & gas |
2 June 2021 |
Share price performance
Business description
Next events
Analyst
Hellenic Petroleum is a research client of Edison Investment Research Limited |
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Hellenic Petroleum has presented its updated strategy, which involves accelerating the energy transition aimed at a significant reduction in CO2 emissions and spending up to €2bn on clean-energy projects by 2030 to drastically decarbonise its activities. Q121 results were negatively affected by lower domestic oil demand amid the COVID-19 pandemic-driven lockdown. We expect Hellenic will benefit from an increase in demand for transport fuels as the restrictions are gradually lifted in Q221 and with Greece opening for tourists in May. We have updated our estimates to reflect Q121 results. Our valuation is up 6% to €6.91/share, implying a 10% potential upside, as we move to FY22e peer group multiples.
Year-end |
Revenue |
Adjusted EBITDA* (€m) |
Net debt** |
P/E |
Dividend yield |
12/19 |
8,857 |
570 |
1,544 |
10.4 |
7.9 |
12/20 |
5,782 |
333 |
1,673 |
N/A |
1.6 |
12/21e |
7,087 |
487 |
1,630 |
14.8 |
3.4 |
12/22e |
7,261 |
626 |
1,438 |
8.5 |
4.7 |
Note: *Adjusted numbers account for inventory movements and other one-off items. **Net debt excludes lease liabilities.
Focus on renewable energy sources
Hellenic has introduced an aggressive capital investment plan (€3.5–4bn by 2030) to upgrade its core refining business through energy-efficiency projects, transitioning to cleaner fuels (biofuel) and adopting blue/green hydrogen technologies. It also plans to boost its renewable energy sources (RES) organically and through acquisitions (aiming for 600MW by 2025 and 2GW by 2030), committing half of the proposed spend to clean energy. These investments should support the planned 50% reduction in Hellenic’s carbon footprint by 2030.
Q1 results affected by lower oil demand
The international refining environment remained sluggish in Q121, recording very weak benchmark margins. Fuel demand in Hellenic’s key markets reached historically low levels, affected by travel restrictions. These factors drove Q121 adjusted EBITDA down 53% y-o-y to €60m. We have reduced our FY21 EBITDA forecast by 7%, reflecting a weaker-than-expected Q1, although our refining assumptions are broadly unchanged for H221 and FY22. The negative effect of lower refining profits in FY21 is partially offset by improved petrochemical operations, supported by high polypropylene (PP) margins in H121.
Valuation: Blended valuation of €6.91/share
Our valuation is based on a blend of discounted cash flow (DCF), EV/EBITDA and P/E. Hellenic trades at a premium to European peers (6.7x FY22e EV/EBITDA versus 5.5x and 8.5x FY22e P/E versus 7.9x). Our blended valuation is €6.91/share, up from €6.55/share, as we roll forward our peer valuation to FY22. We believe that Hellenic should benefit from increasing domestic traffic and air travel, supported by progress in COVID-19 vaccinations and the start of the summer season as restrictions are gradually lifted.
Reduction of CO2 emissions by turning towards RES
Hellenic Petroleum operates three refineries in Greece with a total capacity of 344kbd (65% of the Greek refinery output). Two of the refineries (Aspropyrgos and Εlefsina) are complex, integrated and provide significant flexibility of feedstocks and throughput. The third, Thessaloniki, is small and simple, but houses Hellenic’s petrochemicals units. Hellenic also has a sizeable marketing division (domestic and international) and a large storage capacity (41.8mmbbl).
Hellenic has presented an updated strategy, ELPE Vision 2025. It intends to drastically decarbonise its activities, aiming at 50% reduction in CO2 emissions by 2030 (scope 1 and 2) with 30% through improving refining operations, including energy-efficiency projects, the transition to cleaner fuels (biofuels, hydrotreated vegetable oil), renewable forms of energy and the adoption of blue and green hydrogen technologies, and the remaining 20% from RES. Hellenic targets significant expansion of its RES portfolio to 600MW by 2025 and 2GW by 2030, initially via photovoltaic (PV) and onshore wind projects, growing both organically and through acquisitions within and outside Greece. In addition to the Kozani 204 PV project (which should start in Q122), the company has secured 300MW of PV and wind projects at an advanced permitting stage (receiving environmental terms and/or binding connection agreements).
Hellenic plans to spend €3.5–4bn on these initiatives by 2030, with about half on refining activities and the rest on clean-energy projects, making renewables a key growth area, accounting for 75% of growth capex in the medium term. Management expects shareholders to benefit as these investments should provide more stability for the group’s cash flows.
The strategic plan also includes changes in corporate structure and governance, as well as changing the group's name. Management is considering setting up a new holding company and removing ‘petroleum’ from its name to reflect the new structure, which is not focused on oil alone.
We await more details on the projects introduced in the updated strategy, such as specific timeframes and budgets.
In addition, Hellenic plans to increase the capacity of its PP plant in Thessaloniki by 25% to 300,000 metric tonnes. This investment should be completed in 2.5 years (FY24) with a budget of €35m and should deepen the vertical integration with the refining business. We expect the annualised effect on EBITDA of c €6–7m (which may change depending on the PP margin).
Q1 results affected by sluggish refining environment
In Q121 Hellenic reported adjusted EBITDA of €60m, versus €77m in Q420 and €128m in Q120. As can be seen in Exhibit 1, the main reason for weakness was low benchmark refining margins, following the impact of COVID-19 on markets. Higher costs for carbon-emission rights under a European Union emissions trading system also weighed on performance. However, strong margins on PP were a partial offset, allowing the petrochemicals segment to record the best quarter in its history; this strength has continued in Q221 as PP margins remained favourable in April and May. Overall, the refining-environment factors had a combined negative impact of €121m but were partially balanced by €23m from improved performance, supported by launch of the new 98 premium fuel (allowing Hellenic to improve marketing margins).
|
Exhibit 1: Adjusted EBITDA bridge (Q121 vs Q120) |
|
|
Source: Hellenic Petroleum |
Crude oil prices have rebounded to pre-COVID-19 pandemic levels, averaging US$61/bbl in Q121, which is significantly higher than the Q420 average of US$44/bbl. However, refining margins remained very weak for the fourth quarter in a row, as fuel demand in Hellenic’s key markets remained low, affected by travel restrictions.
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Exhibit 2: Benchmark margins ($/bbl) for FCC |
Exhibit 3: Benchmark margins ($/bbl) for hydrocracking |
|
|
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Source: Hellenic Petroleum. Note: FCC, fluid catalytic cracking. |
Source: Hellenic Petroleum |
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Exhibit 2: Benchmark margins ($/bbl) for FCC |
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Source: Hellenic Petroleum. Note: FCC, fluid catalytic cracking. |
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Exhibit 3: Benchmark margins ($/bbl) for hydrocracking |
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|
Source: Hellenic Petroleum |
Demand for refinery products in the Greek domestic market was at its lowest level ever in Q121 (even when compared to 2020) as it was still affected by reduced economic activity due to lockdowns in Q121.
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Exhibit 4: Domestic market fuel demand (MT 000s) |
Exhibit 5: Aviation and bunkers fuel demand (MT 000s) |
|
|
|
Source: Hellenic Petroleum |
Source: Hellenic Petroleum |
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Exhibit 4: Domestic market fuel demand (MT 000s) |
|
|
Source: Hellenic Petroleum |
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Exhibit 5: Aviation and bunkers fuel demand (MT 000s) |
|
|
Source: Hellenic Petroleum |
The overall macroeconomic environment should start to improve from summer 2021 as progress in coronavirus vaccination programmes increase domestic traffic and air travel. Hellenic should benefit from the resultant tourist inflow with Greece reopened to tourists from mid-May and from pandemic restrictions lifting around the world. These should drive the increase in domestic demand for jet and road fuel in Greece and neighbouring countries.
Financial estimates
We have updated our estimates to reflect Q121 results and will review our forecasts in more detail when information is available on the projects that are part of the updated strategy (capex, financing and timelines).
Key changes to our financial estimates and market expectations include improved performance in petrochemicals in Q221, supported by high margins in PP; the adverse impact of a weaker US dollar versus euro (-1% versus previous forecasts); and updated oil prices forecasts (+3% versus previous forecasts). We expect refining margins to remain under pressure, with improvements starting in the summer tourist season and a gradual recovery of the global economy. As a result, we lowered our refining margin assumption for Q221 and kept it unchanged for H221.
All the above, coupled with the weaker Q121 results, led to a 7% reduction in our FY21 total adjusted EBITDA estimate. Our FY22 estimates remain broadly unchanged.
Exhibit 6: Changes to Edison forecasts
€m |
Actual |
Edison new |
Edison old |
Difference |
|||
|
FY20 |
FY21e |
FY22e |
FY21e |
FY22e |
FY21e |
FY22e |
Adjusted EBITDA, refining |
187 |
261 |
386 |
307 |
394 |
-15% |
-2% |
Adjusted EBITDA, petrochemicals |
61 |
117 |
103 |
107 |
103 |
10% |
1% |
Adjusted EBITDA, marketing |
97 |
118 |
119 |
118 |
119 |
0% |
0% |
Adjusted EBITDA, RES |
- |
- |
18 |
- |
18 |
- |
- |
Total adjusted EBITDA |
333 |
487 |
626 |
525 |
634 |
-7% |
-1% |
Associates |
30 |
20 |
10 |
10 |
10 |
97% |
0% |
Adjusted EBIT |
85 |
244 |
379 |
287 |
391 |
-15% |
-3% |
Finance costs |
(115) |
(102) |
(85) |
(102) |
(85) |
0% |
0% |
Adjusted net income |
5 |
130 |
228 |
147 |
237 |
-11% |
-4% |
Source: Hellenic Petroleum data, Edison Investment Research
Valuation
We value Hellenic using a blend of DCF, leveraged and unleveraged EV/EBITDA, and P/E multiples, arriving at a valuation of €6.91/share, 10% higher versus our last published estimate (€6.55/share). This increase is mainly driven by the higher peer group based valuation as we now focus on more normalised FY22 multiples, while our DCF valuation is slightly lower on the back of the reduced estimates.
Our peer-based valuation of Hellenic is now based on FY22 multiples instead of FY21. As seen in Exhibit 8, due to near-term market volatility and uncertainty in earnings estimates for FY21, peer multiples exhibit high deviations from the mean. FY22 should see a gradual normalisation in fundamentals and improved visibility, both in terms of market demand and earnings estimates.
Hellenic trades at FY22e multiples of 8.5x P/E and 6.7x EV/EBITDA, compared with the European group averages of 7.9x and 5.5x, respectively. Its EV per complexity-adjusted barrel is higher than European peers’ average at $1,691/bbld. At the same time, it trades at a discount to its US peers on most valuation metrics.
Our DCF valuation is based on cash flows to 2026, using a 7% cost of capital. We incorporate a terminal value, which assumes the unwinding of working capital, and 1% terminal growth. This results in a DCF valuation of €6.80/share versus our previous estimate of €7.00/share. The valuation was adversely affected by the weaker US dollar versus the euro (-€0.10/share), weaker Q121 results, a lower refining margin assumption for Q221 and higher working capital outflow (mainly due to the international oil price recovery and a higher inventory level). This was partially offset by the recovery of inventory losses recorded in 2020 and we expect further recovery in Q2. We have not yet included the effect of the PP plant capacity expansion investment in our model. This €35m investment should be completed by FY24 and we expect it should generate EBITDA of c €6–7m annually.
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Exhibit 7: Hellenic valuation |
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Source: Edison Investment Research, Refinitiv. Note: Priced at 1 June 2021. |
Exhibit 8: Peer group valuation
|
Market cap |
EV |
P/E |
P/E |
EV/EBITDA |
EV/EBITDA |
FCF yield |
FCF yield |
P/CF |
P/CF |
Net debt/ |
Net debt/ |
Div yield |
Refining capacity |
EV/bod of complexity adjusted capacity |
|
Edison estimate – Hellenic |
1,929* |
4,173* |
14.8 |
8.5 |
8.6 |
6.7 |
8.3% |
19.3% |
4.5 |
3.5 |
3.3 |
2.3 |
3.4% |
344 |
1,691 |
|
Grupa Lotos |
2,669 |
3,640 |
13.7 |
8.8 |
5.7 |
4.7 |
-6.6% |
8.0% |
5.8 |
4.9 |
0.8 |
0.7 |
1.1% |
211 |
1,555 |
|
Hellenic Petroleum (consensus) |
2,358 |
5,411 |
16.6 |
8.5 |
9.4 |
7.1 |
10.5% |
3.9% |
3.8 |
3.5 |
4.0 |
3.0 |
5.2% |
344 |
1,691 |
|
Motor Oil Hellas Corinth Refineries |
1,896 |
3,030 |
9.8 |
6.3 |
6.0 |
4.8 |
3.8% |
10.2% |
3.6 |
3.7 |
2.2 |
1.8 |
7.1% |
186 |
1,412 |
|
Polski Koncern Naftowy Orlen |
9,551 |
13,488 |
10.0 |
8.4 |
5.2 |
4.6 |
-3.6% |
-0.7% |
4.1 |
4.1 |
1.4 |
1.2 |
1.1% |
718 |
2,041 |
|
Saras |
853 |
1,375 |
- |
- |
7.5 |
5.6 |
19.0% |
14.3% |
3.7 |
3.9 |
3.3 |
2.5 |
1.5% |
300 |
392 |
|
Turkiye Petrol Rafinerileri |
2,911 |
4,650 |
17.6 |
7.6 |
10.1 |
6.2 |
5.6% |
8.0% |
11.8 |
6.1 |
3.3 |
2.1 |
0.7% |
602 |
812 |
|
Europe average |
3,373 |
5,266 |
13.5 |
7.9 |
7.3 |
5.5 |
4.8% |
7.3% |
5.5 |
4.4 |
2.5 |
1.9 |
2.8% |
394 |
1,317 |
|
CVR Energy |
2,171 |
3,338 |
- |
21.0 |
11.2 |
7.8 |
9.3% |
9.8% |
10.3 |
7.0 |
3.4 |
2.1 |
0.0% |
185 |
1,388 |
|
HollyFrontier |
5,515 |
8,026 |
- |
10.1 |
10.0 |
6.5 |
-9.8% |
9.2% |
9.3 |
5.0 |
2.2 |
1.2 |
2.6% |
457 |
1,405 |
|
Marathon Petroleum |
40,791 |
80,534 |
- |
18.7 |
12.0 |
10.2 |
5.8% |
9.7% |
7.8 |
5.3 |
4.7 |
3.6 |
3.7% |
2,874 |
2,644 |
|
Phillips 66 |
38,029 |
54,578 |
33.5 |
13.1 |
13.2 |
9.4 |
5.1% |
8.4% |
10.0 |
8.1 |
3.2 |
2.1 |
4.1% |
2,184 |
2,272 |
|
Valero Energy |
33,592 |
46,928 |
82.7 |
14.5 |
12.3 |
8.1 |
4.6% |
9.3% |
9.7 |
6.2 |
3.0 |
1.7 |
4.8% |
3,100 |
1,328 |
|
Americas average |
24,020 |
38,681 |
58.1 |
15.5 |
11.8 |
8.4 |
3.0% |
9.3% |
9.4 |
6.3 |
3.3 |
2.1 |
3.0% |
1,760 |
1,807 |
|
Total Average |
12,758 |
20,454 |
26.3 |
11.7 |
9.3 |
6.8 |
4.0% |
8.2% |
7.3 |
5.2 |
2.9 |
2.0 |
2.9% |
1,015 |
1,540 |
|
Total Median |
2,911 |
5,411 |
15.1 |
8.8 |
10.0 |
6.8 |
5.1% |
9.2% |
7.8 |
5.0 |
3.2 |
2.1 |
2.6% |
457 |
1,412 |
|
Source: Edison Investment Research, Refinitiv. Note: Priced at 1 June 2021. *FX = US$1.22/€.
Exhibit 9: Financial summary
IFRS, year-end: 31 December |
€m |
|
2018 |
2019 |
2020 |
2021e |
2022e |
Income statement |
|
|
|
|
|
|
|
Total revenues |
|
|
9,769 |
8,857 |
5,782 |
7,087 |
7,261 |
Cost of sales |
|
|
(8,770) |
(8,052) |
(5,818) |
(6,139) |
(6,431) |
Gross profit |
|
|
999 |
805 |
(36) |
948 |
830 |
SG&A (expenses) |
|
|
(475) |
(470) |
(453) |
(431) |
(432) |
Other income/(expense) |
|
|
(10) |
6 |
(13) |
(5) |
(5) |
Exceptionals and adjustments |
|
|
(19) |
2 |
(587) |
275 |
15 |
Reported EBIT |
|
|
514 |
341 |
(501) |
512 |
394 |
Finance income/(expense) |
|
|
(146) |
(151) |
(115) |
(102) |
(85) |
Profit (loss) from JVs / associates (post tax) |
|
|
(2) |
18 |
30 |
20 |
10 |
Other income (includes exceptionals) |
|
|
2 |
(1) |
5 |
5 |
0 |
Reported PBT |
|
|
369 |
207 |
(582) |
436 |
319 |
Income tax expense (includes exceptionals) |
|
|
(154) |
(43) |
185 |
(102) |
(80) |
Reported net income |
|
|
215 |
164 |
(397) |
333 |
239 |
Basic average number of shares, m |
|
|
306 |
306 |
306 |
306 |
306 |
Basic EPS (€) |
|
|
0.7 |
0.5 |
(1.3) |
1.1 |
0.8 |
|
|
|
|
|
|
||
Adjusted EBITDA |
|
|
730 |
570 |
333 |
487 |
626 |
Adjusted EBIT |
|
|
533 |
339 |
85 |
244 |
379 |
Adjusted PBT |
|
|
388 |
205 |
5 |
167 |
304 |
Adjusted net income |
|
|
296 |
185 |
5 |
130 |
228 |
Adjusted EPS (€) |
|
|
0.97 |
0.61 |
0.02 |
0.43 |
0.75 |
DPS (€) |
|
|
0.75 |
0.50 |
0.10 |
0.21 |
0.30 |
|
|
|
|
|
|
||
Balance sheet |
|
|
|
|
|
||
Property, plant and equipment |
|
|
3,269 |
3,298 |
3,380 |
3,413 |
3,346 |
Intangible assets |
|
|
106 |
104 |
106 |
105 |
105 |
Other non-current assets |
|
|
529 |
744 |
797 |
805 |
813 |
Total non-current assets |
|
|
3,903 |
4,146 |
4,283 |
4,323 |
4,263 |
Cash and equivalents |
|
|
1,276 |
1,088 |
1,203 |
847 |
1,039 |
Inventories |
|
|
993 |
1,013 |
694 |
995 |
1,010 |
Trade and other receivables |
|
|
822 |
840 |
582 |
542 |
547 |
Other current assets |
|
|
3 |
6 |
12 |
13 |
13 |
Total current assets |
|
|
3,094 |
2,947 |
2,492 |
2,397 |
2,609 |
Non-current loans and borrowings |
|
|
1,627 |
1,610 |
2,131 |
1,678 |
1,678 |
Non-current lease liabilities |
|
|
|
169 |
171 |
163 |
163 |
Other non-current liabilities |
|
|
420 |
448 |
294 |
319 |
319 |
Total non-current liabilities |
|
|
2,047 |
2,227 |
2,597 |
2,160 |
2,160 |
Trade and other payables |
|
|
1,349 |
1,402 |
1,547 |
1,571 |
1,582 |
Current loans and borrowings |
|
|
1,109 |
1,022 |
745 |
799 |
799 |
Current lease liabilities |
|
|
|
31 |
30 |
28 |
28 |
Other current liabilities |
|
|
97 |
84 |
8 |
10 |
10 |
Total current liabilities |
|
|
2,555 |
2,539 |
2,329 |
2,409 |
2,420 |
Equity attributable to company |
|
|
2,331 |
2,262 |
1,786 |
2,090 |
2,231 |
Non-controlling interest |
|
|
64 |
65 |
62 |
62 |
62 |
|
|
|
|
|
|
||
Cashflow statement |
|
|
|
|
|
||
Profit before tax |
|
|
369 |
207 |
(582) |
436 |
319 |
Depreciation and amortisation |
|
|
197 |
231 |
248 |
243 |
247 |
Other adjustments |
|
|
237 |
172 |
233 |
201 |
75 |
Movements in working capital |
|
|
(296) |
26 |
528 |
(374) |
(9) |
Income taxes paid |
|
|
(5) |
(149) |
23 |
(81) |
(80) |
Cash from operations (CFO) |
|
|
503 |
486 |
450 |
425 |
552 |
Capex |
|
|
(157) |
(241) |
(288) |
(266) |
(180) |
Acquisitions & disposals net |
|
|
(16) |
(5) |
(6) |
0 |
0 |
Other investing activities |
|
|
311 |
29 |
17 |
5 |
5 |
Cash used in investing activities (CFIA) |
|
|
138 |
(218) |
(277) |
(261) |
(175) |
Net proceeds from issue of shares |
|
|
(1) |
0 |
0 |
0 |
0 |
Dividends paid in period |
|
|
(151) |
(155) |
(154) |
(31) |
(98) |
Movements in debt |
|
|
(97) |
(111) |
252 |
(396) |
0 |
Other financing activities |
|
|
4 |
(160) |
(144) |
(98) |
(87) |
Cash from financing activities (CFF) |
|
|
(244) |
(458) |
(47) |
(525) |
(185) |
Increase/(decrease) in cash and equivalents |
|
|
397 |
(189) |
125 |
(361) |
192 |
Currency translation differences and other |
|
|
5 |
2 |
(11) |
5 |
0 |
Cash and equivalents at end of period |
|
|
1,275 |
1,088 |
1,203 |
847 |
1,039 |
Net (debt) cash (incl. lease) |
|
|
(1,460) |
(1,744) |
(1,874) |
(1,822) |
(1,630) |
Net (debt) cash (excl. lease) |
|
|
(1,460) |
(1,544) |
(1,673) |
(1,630) |
(1,438) |
Source: Hellenic Petroleum, Edison Investment Research
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