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Petkim: Very strong start to the year

  • Petkim posted TL884mn net income in 1Q21, higher than our estimate of TL750mn and consensus estimate of TL 647mn
  • The company posted TL1,194mn EBITDA in 1Q21, higher than our estimate of TL1,082mn and consensus estimate of TL992mn.
  • Petkim trades at 6.10x 2021E EV/EBITDA, implying 24% discount compared to 5-yr hist. mult. of 8.1x.

Petkim posted TL884mn net income in 1Q21, higher than our estimate of TL750mn and consensus estimate of TL 647mn. The deviation stemmed from TL112mn higher than expected EBIT in 1Q21.

The company posted TL1,194mn EBITDA in 1Q21, higher than our estimate of TL1,082mn and consensus estimate of TL992mn. Thanks to strong product margins, the company’s EBITDA/ton increased to US$254 in 1Q21 (ATA Est: US$234) from US$42 in 1Q20. 

Based on our estimates Petkim trades at 6.10x 2021E EV/EBITDA, implying 24% discount compared to 5-yr historic multiple of 8.1x. We believe that the initial reaction to the results will be positive thanks to strong operating performance in 1Q21 and vibrant outlook for the remaining of the year.

Petkim’s revenue increased by 82% y/y to TL5,034mn in 1Q21 (ATA Est: TL5,059mn) boosted by 41% higher average sales prices, 7% y/y higher sales volume and appreciation of US$ against to TL by 21% y/y in 1Q21. Helps by the uninterrupted feedstock procurement from STAR Refinery, the company generated 814K gross production in 1Q21, implying 1.5% increase y/y and resulting in 100% CUR of 100% in 1Q21. The company’s sales volume of 637K tons was 2% higher than our estimate of 626K.

Positive outlook for the core spread. Ethylene prices increased by 48% q/q to US$1,163/ton in 1Q21 while naphtha prices increased by 44% q/q to US$540 in the same period. Healthy global demand and supply shortage of petrochemical product globally & global logistic network problems helps the spread to increase to US$623/ton in 1Q21 from US$408/ton in 4Q20. So far in 2Q21 the spread averaged at US$662/ton compared to our estimate of US$564/ton in our model. We expect US$522/ton spread for 2021 (2020: US$338/ton). If the spread remains at recent average of US$662/ton, we foresee an upside risk to our 2021 estimates.

Net debt increased by 9% q/q to TL5.1bn in 1Q21 from TL4.6bn in 4Q20 due to TL587 increase in NWC. The company’s net debt / EBITDA ratio declined to 1.8x in 1Q21 from 2.6x in 4Q20.

Petkim will hold conference call today at 16.00 Istanbul time.


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