Last close As at 05/08/2026
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Research: Energy & Resources
Hellenic Petroleum experienced a challenging Q320 as benchmark refining margins fell to record-low levels. Demand for global crude oil and oil products remained low during the quarter that is typically strong for the company due to high tourist activity in Greece. Despite the current adversities, Hellenic maintained a strong operating performance and was capable of minimising the impacts of COVID-19. This was possible due to its storage capacity and the flexibility of its refining system. We have updated our estimates and valuation to reflect Q320 results and the impact of new lockdown measures in Europe. Our updated valuation is down 4% to €6.55/share, with an upside of 26% to the current share price.
Written by
Hellenic Petroleum |
Renewables addition as refining margins struggle |
Q320 results |
Oil & gas |
18 November 2020 |
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 experienced a challenging Q320 as benchmark refining margins fell to record-low levels. Demand for global crude oil and oil products remained low during the quarter that is typically strong for the company due to high tourist activity in Greece. Despite the current adversities, Hellenic maintained a strong operating performance and was capable of minimising the impacts of COVID-19. This was possible due to its storage capacity and the flexibility of its refining system. We have updated our estimates and valuation to reflect Q320 results and the impact of new lockdown measures in Europe. Our updated valuation is down 4% to €6.55/share, with an upside of 26% to the current share price.
Year-end |
Revenue |
Adjusted EBITDA* (€m) |
Net debt |
P/E |
Dividend yield |
12/18 |
9,769 |
730 |
1,460 |
8.0 |
14.5** |
12/19 |
8,857 |
570 |
1,544 |
9.5 |
9.7 |
12/20e |
6,088 |
330 |
1,851 |
26.8 |
9.7 |
12/21e |
5,977 |
573 |
1,890 |
9.0 |
9.7 |
Note: *Adjusted numbers account for inventory movements and other one-off items. **Includes special dividend from DESFA proceeds.
Record-low refining margins affect results
In Q320, refining margins reached negative all-time lows. The outlook remains weak for the near term as economic uncertainty persists and new lockdowns are imposed. Refining margins recorded a small recovery at the beginning of Q420, as inventory clears, with some refiners curtailing production or terminating activities. We expect 2021 to be a difficult year, until a vaccine is available and global economies recover to pre-pandemic levels. Hellenic has a resilient refining system and is withstanding the current headwinds the industry is facing better than some of its peers, taking advantage of its synergetic business model.
Completion of Kozani 204MW project acquisition
Despite the challenging environment, Hellenic achieved two important milestones: the Aspropyrgos refinery turnaround without incident and the Kozani photovoltaic project acquisition. The full restart of the refinery is expected in November with improved environmental performance. Completion of the Kozani project acquisition demonstrates Hellenic’s commitment to renewables during these challenging times. Construction works are planned to commence in November and the project is expected to be fully operational in Q222.
Valuation: Blended valuation of €6.55/share
Our valuation is based on a blend of DCF, EV/EBITDA and P/E approaches. The company currently trades at a premium on 7.2x FY21e EV/EBITDA versus peers in Europe at 5.3x, and 9.0x FY21e P/E compared to the European sector average of 7.5x. Compared to US peers, Hellenic continues to trade at a discount on most metrics. Our blended valuation falls by 4% to €6.55/share (previously €6.81/share), reflecting expected lower demand for oil products in the coming quarters and lower realised margins as new lockdown measures are imposed in Europe.
Financials and changes to estimates
Key changes to our financial estimates and market expectations include weaker global demand for oil products during the year caused by the COVID-19 pandemic. As a consequence, we have lowered our refining margin estimates for Q420 and Q121 as most countries have implemented new lockdown measures to minimise the impacts of a second coronavirus wave. We expect margins to remain under pressure for at least the next three to six months, with subsequent improvements as the global economy recovers from the coronavirus pandemic and oil prices potentially remain at relatively subdued levels. All in all, our FY20 total EBITDA estimate is 13% lower vs our previous estimate to account for ongoing weakness in the benchmark margins and our FY21 total EBITDA estimate decreases by 5%.
Exhibit 5: Changes to Edison forecasts
€m |
Actual |
Edison new |
Edison old |
Difference (%) |
|||
|
FY19 |
FY20e |
FY21e |
FY20e |
FY21e |
FY20e |
FY21e |
Adjusted EBITDA, refining |
346 |
181 |
362 |
245 |
387 |
-26% |
-6% |
Adjusted EBITDA, petrochemicals |
93 |
63 |
84 |
66 |
90 |
-5% |
-6% |
Adjusted EBITDA, marketing |
138 |
93 |
134 |
78 |
135 |
19% |
-1% |
Other |
(14) |
(9) |
(8) |
(10) |
(8) |
-10% |
0% |
Total adjusted EBITDA |
570 |
330 |
573 |
379 |
604 |
-13% |
-5% |
Associates |
18 |
22 |
10 |
19 |
10 |
||
Adjusted EBIT |
339 |
88 |
331 |
136 |
362 |
-35% |
-9% |
Finance costs |
(151) |
(106) |
(107) |
(105) |
(98) |
||
Adjusted net income |
167 |
59 |
176 |
77 |
206 |
-23% |
-15% |
Source: Hellenic Petroleum data, Edison Investment Research
Our updated FY20 EBITDA estimate is currently 8% below consensus, while our FY21 EBITDA estimate is broadly in line with consensus.
Exhibit 6: Edison forecasts versus consensus
€m |
Actual |
Edison |
Consensus |
Difference (%) |
|||
|
FY19 |
FY20 |
FY21 |
FY20 |
FY21 |
FY20 |
FY21 |
Adjusted EBITDA, refining |
346 |
181 |
362 |
||||
Adjusted EBITDA, petrochemicals |
93 |
63 |
84 |
||||
Adjusted EBITDA, marketing |
138 |
93 |
134 |
||||
Other |
(14) |
(9) |
(8) |
||||
Total adjusted EBITDA |
570 |
330 |
573 |
360 |
570 |
-8% |
0% |
Associates |
18 |
22 |
10 |
||||
Adjusted EBIT |
339 |
88 |
331 |
-72 |
362 |
-222% |
-9% |
Finance costs |
(151) |
(106) |
(107) |
||||
Adjusted net income |
167 |
59 |
176 |
13 |
149 |
349% |
18% |
Source: Hellenic Petroleum data, Edison Investment Research, Refinitiv consensus estimates as at 18 November 2020
Valuation
We value Hellenic using a blend of discounted cash flow (DCF), leveraged and unleveraged FY21e EV/EBITDA and FY21e P/E multiples, arriving at a valuation of €6.55/share, 4% lower than our last published estimate of €6.81/share, driven by lower earnings estimates for Q420 and FY20. Changes to our forecasts are shown in Exhibit 5 above.
Hellenic trades on FY21e multiples of 9.0x P/E and 7.2x EV/EBITDA compared to the European group averages of 7.5x and 5.3x, respectively. Its free cash flow (FCF) yield is also slightly higher than the peer group average at 13.8% in FY21e and its EV per complexity adjusted barrel is higher than European peers at $1,471/bod. At the same time, the company trades at a discount to US peers on the majority of valuation metrics.
Our DCF valuation is based on discounted cash flows to 2025, using an unchanged 7% cost of capital. We incorporate a terminal value, which assumes the unwinding of working capital and a 1% terminal growth. This results in a DCF valuation of €7.13/share versus our previous estimate of €7.73/share. The reduction in DCF reflects lower refining margins in the second half of 2020 and Q121.
|
Exhibit 7: Hellenic valuation |
|
|
Source: Edison Investment Research. Note: Price as at 18 November 2020. |
Since the beginning of the year, the market caps of Hellenic and its peers have decreased by an average of c 40%. Concerns about lower global demand for oil and petrochemicals have had a negative impact on global refining systems. Nonetheless, compared to its European peers, Hellenic benefits from a flexible refining system with large storage capacity and proximity to Middle East oil suppliers, taking advantage of crude spreads, especially on increasing freight rates.
|
Exhibit 8: Share price performance of Hellenic and its peers since January 2020 |
|
|
Source: Edison Investment Research. Note: Prices as at 18 November 2020. |
Exhibit 9: Peer group valuation table
Market cap |
EV |
P/E |
P/E |
EV/EBITDA |
EV/EBITDA |
FCF yield |
FCF yield |
P/CF |
P/CF |
Net debt/ |
Net debt/ EBITDA |
Div yield |
Refining capacity |
EV/bod of complexity adjusted capacity |
|
Edison estimate – Hellenic |
1,795* |
4,657* |
26.8 |
9.0 |
12.5 |
7.2 |
-3.2% |
13.8% |
12.1 |
3.6 |
6.4 |
3.7 |
9.7% |
344 |
1,471 |
Europe average |
2,340 |
4,163 |
4.0 |
7.5 |
8.6 |
5.3 |
-16.4% |
13.7% |
0.4 |
3.6 |
2.3 |
1.2 |
2.1% |
385 |
1,065 |
Grupa Lotos |
1,676 |
2,315 |
7.3 |
5.1 |
4.1 |
3.9 |
11.4% |
16.0% |
3.0 |
3.4 |
1.3 |
1.3 |
1.1% |
211 |
1,098 |
Hellenic Petroleum (consensus) |
1,877 |
4,706 |
6.1 |
6.9 |
10.4 |
6.9 |
-6.9% |
18.8% |
4.0 |
2.9 |
4.3 |
2.9 |
5.3% |
344 |
1,471 |
Motor Oil Hellas Corinth Refineries |
1,379 |
2,382 |
7.8 |
5.5 |
5.8 |
5.1 |
-18.2% |
7.9% |
7.8 |
3.5 |
1.0 |
0.9 |
5.2% |
185 |
1,120 |
Polski Koncern Naftowy Orlen |
5,713 |
9,256 |
7.0 |
5.2 |
4.5 |
3.9 |
-5.0% |
3.7% |
3.3 |
2.9 |
0.3 |
0.3 |
0.7% |
707 |
1,424 |
Saras |
611 |
975 |
(14.3) |
16.5 |
3.3 |
4.0 |
-66.2% |
20.0% |
(8.0) |
1.7 |
(0.4) |
(0.4) |
0.0% |
300 |
278 |
Turkiye Petrol Rafinerileri |
2,786 |
5,345 |
10.2 |
6.0 |
23.3 |
7.9 |
-13.3% |
15.8% |
(7.4) |
6.8 |
7.4 |
2.5 |
0.0% |
564 |
997 |
Americas average |
16,381 |
30,452 |
362.1 |
13.0 |
20.7 |
9.4 |
-4.2% |
1.1% |
19.0 |
7.5 |
5.2 |
2.5 |
6.5% |
1,789 |
1,403 |
CVR Energy |
1,472 |
2,708 |
(27.4) |
16.9 |
22.0 |
7.5 |
-6.4% |
5.6% |
39.6 |
7.6 |
4.4 |
1.5 |
8.2% |
185 |
1,126 |
HollyFrontier |
3,825 |
6,017 |
71.9 |
8.5 |
11.1 |
8.0 |
0.8% |
-10.0% |
7.3 |
7.1 |
2.9 |
2.1 |
5.9% |
457 |
1,053 |
Marathon Petroleum |
26,423 |
65,743 |
(37.1) |
16.7 |
17.7 |
11.0 |
-6.0% |
3.5% |
16.0 |
6.1 |
7.4 |
4.6 |
5.7% |
3,021 |
2,053 |
Phillips 66 |
28,104 |
43,751 |
18.9 |
9.8 |
19.0 |
9.9 |
-3.9% |
4.0% |
14.5 |
8.4 |
4.4 |
2.3 |
5.6% |
2,184 |
1,821 |
Valero Energy |
22,082 |
34,041 |
1,784.2 |
13.4 |
33.7 |
10.8 |
-5.4% |
2.3% |
17.7 |
8.4 |
7.0 |
2.3 |
7.2% |
3,100 |
963 |
Average |
8,145 |
15,158 |
155.1 |
10.0 |
13.9 |
7.2 |
-10.2% |
8.4% |
9.2 |
5.2 |
3.9 |
2.0 |
4.5% |
967 |
1,240 |
Source: Edison Investment Research, Refinitiv. Note: Prices as at 18 November 2020. FX = US$1.13/€.
Exhibit 10: Financial summary
IFRS, year-end: 31 December |
€m |
|
2017 |
2018 |
2019 |
2020e |
2021e |
INCOME STATEMENT |
|
|
|
|
|
|
|
Total revenues |
|
|
7,995 |
9,769 |
8,857 |
6,088 |
5,977 |
Cost of sales |
|
|
(6,907) |
(8,770) |
(8,052) |
(6,138) |
(5,210) |
Gross profit |
|
|
1,087 |
999 |
805 |
(50) |
767 |
SG&A (expenses) |
|
|
(410) |
(475) |
(470) |
(448) |
(448) |
Other income/(expense) |
|
|
(16) |
(10) |
6 |
13 |
11 |
Exceptionals and adjustments |
|
|
18 |
(19) |
2 |
(556) |
0 |
Reported EBIT |
|
|
662 |
514 |
341 |
(490) |
331 |
Finance income/(expense) |
|
|
(165) |
(146) |
(151) |
(106) |
(107) |
Profit (loss) from JVs / associates (post tax) |
|
|
31 |
(2) |
18 |
22 |
10 |
Other income (includes exceptionals) |
|
|
(8) |
2 |
(1) |
11 |
0 |
Reported PBT |
|
|
520 |
369 |
207 |
(563) |
234 |
Income tax expense (includes exceptionals) |
|
|
(136) |
(154) |
(43) |
184 |
(59) |
Reported net income |
|
|
384 |
215 |
164 |
(380) |
176 |
Basic average number of shares, m |
|
|
306 |
306 |
306 |
306 |
306 |
Basic EPS (€) |
|
|
1.3 |
0.7 |
0.5 |
(1.2) |
0.6 |
Adjusted EBITDA |
|
|
|||||
Adjusted EBIT |
|
|
833 |
730 |
570 |
330 |
573 |
Adjusted PBT |
|
|
644 |
533 |
339 |
88 |
331 |
Adjusted net income |
|
|
502 |
388 |
205 |
15 |
234 |
Adjusted EPS (€) |
|
|
371 |
291 |
167 |
59 |
176 |
DPS (€) |
|
|
1.21 |
0.95 |
0.55 |
0.19 |
0.57 |
BALANCE SHEET |
|
|
0.40 |
0.75 |
0.50 |
0.50 |
0.50 |
Property, plant and equipment |
|
|
|||||
Intangible assets |
|
|
|||||
Other non-current assets |
|
|
3,312 |
3,269 |
3,298 |
3,263 |
3,241 |
Total non-current assets |
|
|
106 |
106 |
104 |
105 |
105 |
Cash and equivalents |
|
|
864 |
529 |
744 |
737 |
745 |
Inventories |
|
|
4,282 |
3,903 |
4,146 |
4,104 |
4,090 |
Trade and other receivables |
|
|
1,019 |
1,276 |
1,088 |
1,003 |
514 |
Other current assets |
|
|
1,056 |
993 |
1,013 |
727 |
828 |
Total current assets |
|
|
791 |
822 |
840 |
696 |
743 |
Non-current loans and borrowings |
|
|
12 |
3 |
6 |
7 |
7 |
Other non-current liabilities |
|
|
2,878 |
3,094 |
2,947 |
2,434 |
2,093 |
Total non-current liabilities |
|
|
920 |
1,627 |
1,610 |
1,133 |
683 |
Trade and other payables |
|
|
300 |
420 |
617 |
440 |
440 |
Current loans and borrowings |
|
|
1,220 |
2,047 |
2,227 |
1,572 |
1,122 |
Other current liabilities |
|
|
1,661 |
1,349 |
1,402 |
1,357 |
1,429 |
Total current liabilities |
|
|
1,900 |
1,109 |
1,022 |
1,721 |
1,721 |
Equity attributable to company |
|
|
7 |
97 |
115 |
32 |
32 |
Non-controlling interest |
|
|
3,568 |
2,555 |
2,539 |
3,110 |
3,182 |
CASH FLOW STATEMENT |
|
|
2,309 |
2,331 |
2,262 |
1,790 |
1,813 |
Profit before tax |
|
|
63 |
64 |
65 |
65 |
65 |
Depreciation and amortisation |
|
|
|||||
Other adjustments |
|
|
|||||
Movements in working capital |
|
|
520 |
369 |
207 |
(571) |
234 |
Income taxes paid |
|
|
189 |
197 |
231 |
242 |
242 |
Cash from operations (CFO) |
|
|
207 |
237 |
172 |
116 |
97 |
Capex |
|
|
(463) |
(296) |
26 |
371 |
(75) |
Acquisitions & disposals net |
|
|
(10) |
(5) |
(149) |
(27) |
(59) |
Other investing activities |
|
|
443 |
503 |
486 |
131 |
439 |
Cash used in investing activities (CFIA) |
|
|
(209) |
(157) |
(241) |
(181) |
(220) |
Net proceeds from issue of shares |
|
|
0 |
(16) |
(5) |
0 |
0 |
Dividends paid in period |
|
|
24 |
311 |
29 |
15 |
7 |
Movements in debt |
|
|
(185) |
138 |
(218) |
(166) |
(213) |
Other financing activities |
|
|
0 |
(1) |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
(107) |
(151) |
(155) |
(154) |
(153) |
Increase/(decrease) in cash and equivalents |
|
|
(35) |
(97) |
(111) |
227 |
(450) |
Currency translation differences and other |
|
|
(149) |
4 |
(160) |
(124) |
(111) |
Cash and equivalents at end of period |
|
|
(300) |
(244) |
(458) |
(51) |
(714) |
Net (debt)/cash |
|
|
(42) |
397 |
(189) |
(86) |
(488) |
Source: Hellenic Petroleum, Edison Investment Research
|
|
Research: Industrials
H121 ended strongly for Renewi, recovering from earlier COVID-19 impacts that turned out to be less than management had previously anticipated. Relatively more resilient waste markets and actions taken to control cash flows and reduce costs contributed to this outturn. We have moved estimates ahead in all three forecast years.