26 Eylül 2012 Çarşamba

Petkim Petrokimya (PETKM.IS) Report

Source of opportunity
 
We reiterate our Sell rating on Petkim with a new price target of TRY1.50 (from TRY1.63) due to our lower estimates following the 2Q results and updating our timeline for its new projects after some delays. While Petkim is trying to implement several projects to improve its efficiency, and the new STAR refinery (due in 2016) is likely to contribute synergies, we expect its overall margins and returns to remain low, ranking fourth-quartile (Q4) relative to the global chemicals peers or our Turkish non-financials coverage. With the valuation not compelling, we reiterate our Sell rating.
 
Catalyst
 
In the coming years, we believe Petkim will face rising capex as it tries to expand some of its facilities. The completion of the Socar-Turcas (STAR) refinery (which we do not expect to come online before 2016) is likely to bring significant synergies (we assume c.TRY100 mn pa), however as the timeline is far out, we believe it is unlikely to be priced into the current share price. In addition, this refinery coming on stream is likely to coincide with the US adding significant petrochemical capacity on the back of shale gas revolution there, shifting the global cost curve for basic petrochemicals, which would put the profitability of European and NE Asian high-cost producers like Petkim most at risk.
 
Valuation
 
We value Petkim on a mid-cycle global chemicals EV/EBITDA of 8.0x applied to our new 2013 estimate. We discount this by 20% to 6.4x to reflect Petkim’s Q4 CROCI to derive our new 12-month price target of TRY1.50.
 
Key risks
 
The key risk to our investment case would be a stronger-than-expected global GDP recovery, which would lead to a stronger-than-expected rise in petrochemical prices and expansion of naptha-crack margins.
 
Goldman Sachs Global

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