Company Report: Tupras (İş Yatırım)

We maintain our BUY rating for TUPRS shares with an unchanged PT of 242TL/share, implying an upside potential of 49%. A second dividend payment of TL10.38/share in 2H24, wih an estimated yield of 6.4%, is very likely. We have also incorporated additional EBITDA contribution from sustainable aviation fuel (SAF) (starting with US$55mn in 2027 and US$110mn in 2028 -20230) in our DCF analysis. This coupled with a slight downward revision in 2024E EBITDA to US$1.78bn, left our 12m PT unchanged. Weak operational performance in 1H24 resulting from RUP maintenance has been weighing on the stock’s performance. As the maintenance was completed on time, we expect Company’s operational performance to improve in 2H24, driven by above-average crack margins, better white product yields and differentials. Despite the current high interest rate environment, we do not foresee a significant drop in fuel demand, positioning Tupras as a defensive pick for 2H24.

 
Cracks are normalizing but remain above pre-pandemic averages thanks to supply issues. Crack margins have eased from the highs of 2022 and 2023 but they are likely to remain above historical averages as long as the supply-side issues exist. Supply constraints in Europe due to the tensions in the Black Sea and Red Sea are still supporting middle distillate cracks while the suspension of the gasoline export ban by Russia has dragged down gasoline margins. Despite the current weakness in gasoline margins, we expect a turnaround in the coming months as driving season kicks in. New capacity additions coming online in Nigeria (650kb/d) may ease the supply deficit once the ramp-up period is over.
 
 
Taking advantage of the refining supercycle of the past two years, the company has built up a significant net cash position, reaching TL51.6bn as of 1Q24-end. The company’s management is leveraging the strong cash flow generated in recent years to invest in its strategic transition plan. According to Company’s Strategic Transition Plan, significant portion of investments (40% during 2022-2030, and 70% during 2031-2035), will be allocated towards (SAF), hydrogen and zero carbon electricity production.
 
Risks. Higher than expected contraction in demand for refined products in the European market, easing war-related supply issues in the product markets, faster than expected new capacity additions, higher than expected rise in energy costs are the main downside risks for our valuation. Key upside risks include delays in new capacity additions and increased heavy crude availability in the coming period

 Detaylı bilgi almak, İş Yatırım’ın güncel raporlarına ulaşmak için aşağıdaki linki kullanabilirsiniz.

 http://rapor.isyatirim.com.tr/2_20240703075248726_1.pdf
 
İş Yatırım Menkul Değerler A.Ş.
 www.isyatirim.com.tr

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                  Yasal Uyarı
 
 Burada yer alan yatırım bilgi, yorum ve tavsiyeler yatırım danışmanlığı kapsamında değildir.Yatırım danışmanlığı hizmeti ; aracı kurumlar, portföy yönetim şirketleri, mevduat kabul etmeyen bankalar ile müşteri arasında imzalanacak yatırım danışmanlığı sözleşmesi çerçevesinde sunulmaktadır.Burada yer alan yorum ve tavsiyeler, yorum ve tavsiyede bulunanların kişisel görüşlerine dayanmaktadır.Bu görüşler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabılır.Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.