amorgos34
CHIAGNI & FOTTI SRL
Jpm
We think the market is likely to be somewhat positively surprised with PBR’s
announcement of refinery gate price increases for gasoline of +6% and for
diesel of +4%, as we believe investors were barely considering the company
increasing prices right now. Petrobras’ refinery gate price adjustment of 6%
for gasoline was in line with our modeling expectations increasing prices +5%
in 4Q15 while diesel increase of +4% came as a surprise. The gasoline and
diesel price readjustments at refinery gate lead the current discounts to import
parity of -3% to virtually zero and of +6% to around 10%, respectively. In
case we adjust our model applying the incremental raise of 100bps for
gasoline and incorporate the diesel price increase, our EBITDA estimate for
2016 would increase by ~6% and our cash position at the end of 2016 would
rise by ~6%. In addition, we believe prices increases were positive but
somewhat inferior than currently needed by PBR to reduce the cash burn, and
also lower to the company’s needs to reestablish markets confidence. All in,
we believe investors will praise price readjustments but considering the
macroeconomic deterioration, tomorrow they will ask when comes the next
one?
Refinery gate price increases likely to surprise the market... In our view,
despite the obvious positive impact on the company’s financials on the back
of price increases, we think investors in general would be surprised by
seeing PBR readjusting prices when most of investors were not expecting.
… but is unlikely to be sufficient to calm down PBR’s investors. Over the
last weeks, we witnessed a lot of investors concerned about the company’s
financial situation and what could be the exits to current crisis. In our view,
there is no single solution as the answer passes through adopting several
measures, as price increase to preserve Refining Margins, Cost Cutting,
Capex resize and Asset Sales.
Gasoline and Diesel should start being sold above parity after
readjustments. Brazilian wholesale Gasoline was being sold at a 3%
discount to import parity as of September 29, 2015 while wholesale Diesel
was being sold at a 6% premium to international prices on the same date.
(Please refer to graph on page 2 of this report.).
Our sensitivity analysis indicates our EBITDA estimate would increase
by ~2% for every +1% increase in both diesel and gasoline prices. Our
YE16 cash position also reacts in somewhat a similar magnitude for fuel
prices increase. We estimate the gasoline/diesel price increase results in a
+6% raise in PBR’s cash position at YE16.
Petrobras is trading at 6.6x EV/EBITDA for 2016E vs. Global peers at
5.3
We think the market is likely to be somewhat positively surprised with PBR’s
announcement of refinery gate price increases for gasoline of +6% and for
diesel of +4%, as we believe investors were barely considering the company
increasing prices right now. Petrobras’ refinery gate price adjustment of 6%
for gasoline was in line with our modeling expectations increasing prices +5%
in 4Q15 while diesel increase of +4% came as a surprise. The gasoline and
diesel price readjustments at refinery gate lead the current discounts to import
parity of -3% to virtually zero and of +6% to around 10%, respectively. In
case we adjust our model applying the incremental raise of 100bps for
gasoline and incorporate the diesel price increase, our EBITDA estimate for
2016 would increase by ~6% and our cash position at the end of 2016 would
rise by ~6%. In addition, we believe prices increases were positive but
somewhat inferior than currently needed by PBR to reduce the cash burn, and
also lower to the company’s needs to reestablish markets confidence. All in,
we believe investors will praise price readjustments but considering the
macroeconomic deterioration, tomorrow they will ask when comes the next
one?
Refinery gate price increases likely to surprise the market... In our view,
despite the obvious positive impact on the company’s financials on the back
of price increases, we think investors in general would be surprised by
seeing PBR readjusting prices when most of investors were not expecting.
… but is unlikely to be sufficient to calm down PBR’s investors. Over the
last weeks, we witnessed a lot of investors concerned about the company’s
financial situation and what could be the exits to current crisis. In our view,
there is no single solution as the answer passes through adopting several
measures, as price increase to preserve Refining Margins, Cost Cutting,
Capex resize and Asset Sales.
Gasoline and Diesel should start being sold above parity after
readjustments. Brazilian wholesale Gasoline was being sold at a 3%
discount to import parity as of September 29, 2015 while wholesale Diesel
was being sold at a 6% premium to international prices on the same date.
(Please refer to graph on page 2 of this report.).
Our sensitivity analysis indicates our EBITDA estimate would increase
by ~2% for every +1% increase in both diesel and gasoline prices. Our
YE16 cash position also reacts in somewhat a similar magnitude for fuel
prices increase. We estimate the gasoline/diesel price increase results in a
+6% raise in PBR’s cash position at YE16.
Petrobras is trading at 6.6x EV/EBITDA for 2016E vs. Global peers at
5.3
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