ANALYST VIEW - Deutsche Bank keeps 'Buy' tag on Hungary's MOL, raises target price

http://www.portfolio.hu/en/cikkek.tdp?k=1&i=18640

Deutsche Bank has raised its target price for Hungarian fuels group MOL to HUF 20,000 from HUF 17,500 and maintained its 'Buy' recommendation on the stock. DB has also left is 'Buy' tag on PKN and upped its TP on the Polish oil company to PLN 23 from PLN 18.

"The V-shape recovery theme is beyond the scope of this report but what it does discuss is that the CE3 oil & gas sector has a low beta on a V-shape, mostly due to the large supply overhang rather than demand destruction. As macro headwinds are here to stay, we believe, our top pick remains MOL (Buy) on attractive valuation and INA as a big bottom-up growth driver offsetting these headwinds," said Gergely Várkonyi, research analyst at Deutsche Bank in a research note released on Monday.

He kept his 'Sell' recommendation on both PKN and Lotos as he finds "valuation rich and execution risks high in divestments (PKN) and capacity expansion (LTS)." The analyst upgraded PGNiG to a 'Hold'.

Várkonyi noted he has now added INA to his MOL model. He projects a 20% CAGR in INA's EBITDA in 2009-2012, "driven by 6% upstream volume growth, improving gas price realisation, a benign tax regime, refiners turning profitable post-upgrade and a general improvement in efficiency."

In his view, INA will account for 30-34% of group EBITDA on a 100% basis and project a group EBITDA CAGR of 10% in 2008-12 (40% from the low 2009 base), broader-based than just the INA purchase.

"On 2010 and 2011 EV-based multiples, MOL looks the cheapest and the only one in CE3 at least on a par with EM peers. Risks: oil price, crack spreads, FX, INA turnaround (MOL), divestments (PKN, capacity expansion (Lotos)," Várkonyi concluded.