Target price raised 6%
after 3Q12 results confirm our bullish view
With the company posting results above our already bullish expectations for 3Q12, we raise our target price to TRY51.40 from TRY48.60. Our target price is raised mainly on the DCF component of our analysis providing c.7% higher valuation for the stock while the peer-comparison based analysis provides nearly the same valuation.
3Q12 results positively surprise with higher than expected EBITDA
Tupras posted a bottom line 8% higher than our already bullish expectations while beating CNBCE consensus by more than 15% in 3Q12. The positive surprise came from better than expected underlying profits (EBITDA) which was nearly 10% higher than both our and consensus estimates.
TP based on a blend of DCF (75%) and peer comparisons (25%)
A big portion of our TP comes from DCF as Tupras is in an investment phase. Tupras trades at about a 10% premium over peers on an average 2012-13E P/E basis at 9x, but we think it deserves an even higher multiple for its more robust margins, better growth prospects and high dividend payments which we estimate will enable a 9% yield for 2013.
3Q12 results prove robustness and better industry conditions
Despite nearly halving its purchases from Iran y-y in 3Q12, Tupras was able to increase its net profit by nearly 60% y-y in 3Q12. For 9M12, the bottom line was up 6% y-y despite last year’s 9M11 earnings having been inflated by inventory gains (about 10% we estimate). Clean gross production refining margins for the company (production unit margin before inventory gains or losses) averaged about USD12/bbl in 3Q12 according to our estimates vs. about USD13/bbl a year ago. We estimate Tupras’s margins were significantly supported by the overall recovery in refining industry margins which we estimate has nearly doubled y-y on rationalization of capacity in the industry to a large extent.
With the company posting results above our already bullish expectations for 3Q12, we raise our target price to TRY51.40 from TRY48.60. Our target price is raised mainly on the DCF component of our analysis providing c.7% higher valuation for the stock while the peer-comparison based analysis provides nearly the same valuation.
3Q12 results positively surprise with higher than expected EBITDA
Tupras posted a bottom line 8% higher than our already bullish expectations while beating CNBCE consensus by more than 15% in 3Q12. The positive surprise came from better than expected underlying profits (EBITDA) which was nearly 10% higher than both our and consensus estimates.
TP based on a blend of DCF (75%) and peer comparisons (25%)
A big portion of our TP comes from DCF as Tupras is in an investment phase. Tupras trades at about a 10% premium over peers on an average 2012-13E P/E basis at 9x, but we think it deserves an even higher multiple for its more robust margins, better growth prospects and high dividend payments which we estimate will enable a 9% yield for 2013.
3Q12 results prove robustness and better industry conditions
Despite nearly halving its purchases from Iran y-y in 3Q12, Tupras was able to increase its net profit by nearly 60% y-y in 3Q12. For 9M12, the bottom line was up 6% y-y despite last year’s 9M11 earnings having been inflated by inventory gains (about 10% we estimate). Clean gross production refining margins for the company (production unit margin before inventory gains or losses) averaged about USD12/bbl in 3Q12 according to our estimates vs. about USD13/bbl a year ago. We estimate Tupras’s margins were significantly supported by the overall recovery in refining industry margins which we estimate has nearly doubled y-y on rationalization of capacity in the industry to a large extent.
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