Hellenic Petroleum - Q2 beat driven by refining over-performance

Hellenic Petroleum reported Q2 adjusted EBITDA of €187m, 14% ahead of market consensus and an 18% decrease y-o-y. Realised margins at $10.6/bbl represent $5.8/bbl over-performance relative to the benchmark, partly offsetting a reduction in utilisation due to planned maintenance at Elefsina and Thessaloniki, increased CO2 costs and a stronger euro. Management sees significant improvement in benchmark margins in Q318 providing visibility of continued momentum in refining profitability through 2018. In addition, a high middle distillate yield provides Hellenic with a competitive position ahead of new bunkering fuel specifications. Edison’s blended P/E, EV/EBITDA and DCF valuation stands at €9.0/share, FY18e adjusted EBITDA at €789m and we expect a projected 4.9% dividend yield (excluding incremental returns from DESFA proceeds expected in Q418) to provide share price support.