TUPRS 1Q23 Review (Oyak Yatırım)

Operationally strong results
Tupras reported TL6.7bn net profit for 1Q23, above the market consensus (TL6.0bn) and our estimate (TL6.0bn) thanks to the higher than expected operating profit. On the operational front, EBITDA came in TL12.1bn, above the market estimate (TL10.8bn) and our estimate (TL11.0n). Net refining margin surged to USD9.3/bbl in 1Q23 from USD5.2/bbl in 1Q22 but declined q/q (4Q22: 19/bbl). Diesel margins declined on the back weak heating oil demand due to warm weather conditions, increase in stocks due to pre-embargo purchases and re-opening of China has not yet been reflected on Chinese diesel demand. Decline in jet fuel margins was mainly driven by slowing international flights to especially to China, Europe and the US.

EBITDA grew by 149% y/y thanks to higher net refining margin and TL depreciation
Total sales volume was down by 3% y/y to 5.1mn tons and export volume were 1.2mn, down by 22% mainly due to decrease in gasoline, diesel, and fuel oil. Tupraş produced 5.0mn tons in the quarter (4Q22: 6.0mn tons). In the first quarter of 2023, 71% capacity utilisation was achieved due to planned maintenance and project works. EBITDA was up by 149% y/y thanks to much better products cracks, wider crude differentials and TL depreciation. Together with the strong improvement in operating profitability y/y, despite higher effective tax rate (36.4%) due to a one-off earthquake tax, bottom-line grew 515% y/y. On a q/q basis, EBITDA was down by 28% and net profit down by 62%.

No change in the Company’s guidance for 2023
Tupras’ guidance for 2023 includes an average net refining margin of USD11-12/bbl, 85-90% capacity utilization rate, 24-25mn tons of production, 28-29mn tons of sales and around USD350mn capex.

Outperform rating, TP and estimates maintained
We do not change our Outperform rating and target price of TL109 for TUPRS, as well as our estimates. For 2023E, TL51,1bn EBITDA and TL31.2bn net income. Outperform rating left unchanged for the shares which trade at very attractive 2.5x EV/EBITDA and 4.3x P/E multiples on our 2023 forecasts.


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