Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Oil and Chemicals
A lpha Preferences
Removing Sinopec from Most Preferred
Given Sinopec's 1.1x P/B (11E) valuation and downstream recovery potential in
2H11, the stock remains our top pick among China big 3 oil stock. However, we
are concentrating our China picks toward SinoTech Energy (CTE) as we expect
superior performance. We expect the Q3FY11 earnings result (4 August) coupled
with the companies US$20m share buy back will serve as catalysts.
Removing PTT Chemical from Most Preferred
PTTCH stock has performed well lately, and we continue to like the stock for its
cheap valuation and favourable mid-term outlook. However, we expect stronger
performance from other stocks in the oil portfolio. Also, gas leak and lack of gas
feedstock may contribute to weaker profit QoQ for PTTCH in Q311.
Removing CNOOC from Least Preferred
Following the decline in CNOOC, we are upgrading our rating from Neutral to
Buy. High market expectations coupled with production disruptions have led to
under-performance, in our view. This compares to Brent crude oil prices (up 26%
YTD), PetroChina (up 12% YTD) and Sinopec (up 4% YTD). We continue to
believe there is risk that CNOOC downgrades its 2011 production guidance.
However, we believe the risk has been well flagged by the market. Also the
resumption of full Bozhong complex production this week (39,000bpd) could mark
a turn in events. We also believe CNOOC is not likely to adjust its 5-year target of
6-10% CAGR. Since 2008, CNOOC has 47 discoveries (40 independent).
Reliance Industries (RELI.BO)
Buy
India
Chemicals
RIL’s Q1FY12 earnings at Rs56.6bn were ahead of UBS estimates but in line with
consensus. However EBITDA, at Rs99.3bn, was lower than our estimates, largely
on weaker petrochemical spreads and partly due to lower gas volumes. Overall,
operating numbers were a marginal miss. We reduce our FY12/FY13 earnings
estimates by 4%/2% respectively on weaker petchem segment. No change to our
expectation of a pickup in margins from Sept 2011 (Q3FY12) on seasonal demand
and soft landing of the Chinese economy. We believe concerns over gas production
as well as remarks by the Govt. auditors are overdone and as these get resolved,
there is upside to stock performance.
— Valuation: We value the commodity business i.e. refining and petrochemical at
7xFY13e EV/EBIDTA, within the Asian peer range of 6.6-10.5x.
— Risk: We base our Rs1150 price target on a sum-of-the-parts valuation. We
value the petchem/refining business at 7xFY13e EBIDTA and upstream on
NPV.
Least Preferred
Hindustan Petroleum (HPCL.BO)
Sell
India
Oil Companies, Secondary
Hindustan Petroleum’s (HPCL) existing refineries are low complexity and its new expansion
is delayed. As a result, while it looks attractive on a P/BV basis, it is expensive in terms of
EV/EBIDTA HPCL expects the Bhatinda refinery to be mechanically complete by May 2011.
However, based on our analysis of recent industry newsletters and the history of these types
of projects, we expect a substantial delay and assume it will not be operational until March
2012.
— Valuation: We base our price target on 6.5x FY12E EBITDA, adjusting for HPCL’s
holding in MRPL and OIL. We use an EV/EBITDA approach given uncertainty over
deregulation and as it is more conservative than using P/BV or dividend yield. The
stock is trading at 7.7x FY12E PE and 9.1x FY12E EV/EBIDTA.
— Risk: For HPCL, we believe the biggest risk factor is a cap on product prices, i.e.,
LPG, kerosene, and diesel ie higher crude price without a corresponding rise in
product prices at the retail level. Competition from the private sector is a threat in the
medium term, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Oil and Chemicals
A lpha Preferences
Removing Sinopec from Most Preferred
Given Sinopec's 1.1x P/B (11E) valuation and downstream recovery potential in
2H11, the stock remains our top pick among China big 3 oil stock. However, we
are concentrating our China picks toward SinoTech Energy (CTE) as we expect
superior performance. We expect the Q3FY11 earnings result (4 August) coupled
with the companies US$20m share buy back will serve as catalysts.
Removing PTT Chemical from Most Preferred
PTTCH stock has performed well lately, and we continue to like the stock for its
cheap valuation and favourable mid-term outlook. However, we expect stronger
performance from other stocks in the oil portfolio. Also, gas leak and lack of gas
feedstock may contribute to weaker profit QoQ for PTTCH in Q311.
Removing CNOOC from Least Preferred
Following the decline in CNOOC, we are upgrading our rating from Neutral to
Buy. High market expectations coupled with production disruptions have led to
under-performance, in our view. This compares to Brent crude oil prices (up 26%
YTD), PetroChina (up 12% YTD) and Sinopec (up 4% YTD). We continue to
believe there is risk that CNOOC downgrades its 2011 production guidance.
However, we believe the risk has been well flagged by the market. Also the
resumption of full Bozhong complex production this week (39,000bpd) could mark
a turn in events. We also believe CNOOC is not likely to adjust its 5-year target of
6-10% CAGR. Since 2008, CNOOC has 47 discoveries (40 independent).
Reliance Industries (RELI.BO)
Buy
India
Chemicals
RIL’s Q1FY12 earnings at Rs56.6bn were ahead of UBS estimates but in line with
consensus. However EBITDA, at Rs99.3bn, was lower than our estimates, largely
on weaker petrochemical spreads and partly due to lower gas volumes. Overall,
operating numbers were a marginal miss. We reduce our FY12/FY13 earnings
estimates by 4%/2% respectively on weaker petchem segment. No change to our
expectation of a pickup in margins from Sept 2011 (Q3FY12) on seasonal demand
and soft landing of the Chinese economy. We believe concerns over gas production
as well as remarks by the Govt. auditors are overdone and as these get resolved,
there is upside to stock performance.
— Valuation: We value the commodity business i.e. refining and petrochemical at
7xFY13e EV/EBIDTA, within the Asian peer range of 6.6-10.5x.
— Risk: We base our Rs1150 price target on a sum-of-the-parts valuation. We
value the petchem/refining business at 7xFY13e EBIDTA and upstream on
NPV.
Least Preferred
Hindustan Petroleum (HPCL.BO)
Sell
India
Oil Companies, Secondary
Hindustan Petroleum’s (HPCL) existing refineries are low complexity and its new expansion
is delayed. As a result, while it looks attractive on a P/BV basis, it is expensive in terms of
EV/EBIDTA HPCL expects the Bhatinda refinery to be mechanically complete by May 2011.
However, based on our analysis of recent industry newsletters and the history of these types
of projects, we expect a substantial delay and assume it will not be operational until March
2012.
— Valuation: We base our price target on 6.5x FY12E EBITDA, adjusting for HPCL’s
holding in MRPL and OIL. We use an EV/EBITDA approach given uncertainty over
deregulation and as it is more conservative than using P/BV or dividend yield. The
stock is trading at 7.7x FY12E PE and 9.1x FY12E EV/EBIDTA.
— Risk: For HPCL, we believe the biggest risk factor is a cap on product prices, i.e.,
LPG, kerosene, and diesel ie higher crude price without a corresponding rise in
product prices at the retail level. Competition from the private sector is a threat in the
medium term, in our view.
No comments:
Post a Comment