20160311-高盛-Asia_Pacific__Energy__Oil_-_Refining-Oil_tailwinds_played_out__focus_on_product_mix,_complexity,_retail__Caltex_to_CL-Buy,_TOP_off_CL_31页_861kb

Asia Pacific: Energy: Oil - Refining Summary

Core Content

The Asia-Pacific refining sector has shown strong performance since 2015, driven by lower crude oil prices, which have improved key operating metrics such as crude premium, oil product demand, and operating expenses. However, recent trends suggest that the sector may be nearing a peak in gross refining margins (GRMs), particularly in Singapore, due to weakening demand for middle distillates like diesel and gas oil. The report outlines three key themes shaping the sector's future outlook and provides updated financial forecasts and ratings for various refiners.

Main Points

1. GRMs Trends and Outlook

• GRMs have fallen year-to-date due to softer demand for gasoline and diesel, but a rebound is expected in 2Q16.
• The medium-term outlook shows a slightly tight refining market, primarily driven by gasoline demand.
• Diesel glut is expected to persist, with high global inventories and increased Chinese diesel exports.
• Singapore GRMs peaked in 2015, and are expected to decline in 2016E-2018E.

2. Sector Themes

• Theme 1: Prefer Complex Over Simple Refiners
  • Complex refiners are expected to benefit from widening light-heavy crude oil differentials.
  • Recommended stocks: Reliance, FPCC.
• Theme 2: Prefer Gasoline Over Diesel Exposure
  • Gasoline demand is expected to remain higher than diesel.
  • Recommended stocks: Caltex Australia (on CL), Reliance, FPCC.
• Theme 3: India OMCs - Retail Beneficiaries
  • India's oil demand growth is a bright spot, and refiners with strong retail presence are favored.
  • Recommended stocks: BPCL (on CL), HPCL, IOC.

3. Financial Updates

• EPS and Target Prices (TPs) for Asia refiners have been revised down due to lower GRMs and weaker INR for Indian names.
• CTX has been added to the CL-Buy list due to strong marketing margins and M&A potential.
• TOP remains on the CL-Buy list, while Bangchar and IRPC are Neutral.
• Z Energy is Not Rated.

Key Information

Updated Financial Forecasts

Refiner	Rating	Price (Mar 9, 2016)	Target Price	Upside/Downside
Reliance Ind.	Buy	1,041.95 (Rs)	1,205	16%
BPCL	Buy*	800.20 (Rs)	1,135	42%
HPCL	Buy	740.75 (Rs)	1,015	37%
IOC	Buy	389.90 (Rs)	505	30%
Caltex Australia	Buy*	31.42 (A$)	41.35	32%
FPCC	Buy	6505 (TW)	98.00	11%
Thai Oil	Buy	68.00 (Bt)	75.00	10%
Bangchar	Neutral	30.75 (Bt)	32.00	4%
IRPC	Neutral	4.88 (Bt)	4.55	-7%

Key Risks

• Changes in refining margins
• Fluctuations in oil prices
• Currency risks (especially for Indian names)

Valuation Metrics

Metric	India (Rs)	Taiwan (NT$)	Thailand (Bt)	Australia/New Zealand
Market Cap	50,084	25,511	3,928	6,367
EV/EBITDA (X)	9.5	16.4	8.4	13.8
ROE (%)	7.8	10.4	5.6	8.2
2017E P/BV (X)	6.3	11.0	6.0	7.4
2016E Dividend Yield (%)	1.2	2.4	1.9	4.2
2016E Net Debt/Equity (%)	1.2	2.5	3.6	5.3

Conclusion

The report highlights that while the refining sector in Asia-Pacific has benefited from oil price declines, the market is now at a point where gasoline and complex refining are more favorable than diesel and simple refining. The sector is expected to see modest tightening in the medium term, driven by gasoline demand and refinery maintenance schedules, while diesel faces sustained oversupply. Investors are advised to focus on complex refiners, gasoline-focused stocks, and Indian OMCs with strong retail networks. The updated target prices and ratings reflect the changing dynamics in refining margins and product demand.