A year ago it was hard to believe that a quarter in which BZN shows EBITDA of $ 103 million and a neutralized margin of $ 9.3 per barrel can be disappointing, but given the expectations for higher results in the first quarter and the dramatic effects of hedges on the second quarter, the disappointment is understandable. That BZN will present one of the best years in its history and that the current share price does not reflect the potential for the coming year. We raise the target price per share to NIS 1.6 and the recommendation for an excess return.
Refining sector – back wind from the intervals and wind from the hedges
During the first quarter, ZEN enjoyed an impressive reference margin of $ 11 per barrel, which it was unable to translate into higher margins for two main reasons: one, periodic treatments at the FCC facility that deducted $ 2 from the margin and the other, hedges made by the company at lower margin levels. ($ 8) which deducted an additional $ 2. The disclosure given in the reports regarding the volume of hedges and the levels of spread at which they were made surprised the market and beyond impacting the results of the first quarter also led to the restraint of expectations for the second quarter results.
Polymer sector – The renovation is complete and the results are expected to return to normative levels
The polymer sector, which has been Bazen’s locomotive for the past two years, has shown more solid results over the past two quarters, against the backdrop of renovations at CWL facilities. In view of the rise in the price of naphtha.
Cash flow was hit as a result of hedges and rising oil prices
The increase in the margin during the first and second quarters contributed to BZN’s results, but on the cash flow side, purchasing the raw material at higher prices requires an investment in working capital, and the increase in refining margins led the company to deposit $ 255 million in margin. Strong cash flow from operating (economic) in the quarter of $ 60 million The company shows an increase in net financial debt of $ 120 million to $ 961 million.
Conclusions and recommendations
Overall BZN opens the year well compared to previous years but nevertheless the results disappointed the market expectations and the expectation for a very positive continuation as well. Today in the market we believe that the current environment is very positive for OZN and we are raising the target price per share to NIS 1.6 with a recommendation of an excess return.
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It is clarified and emphasized that what is stated in this review does not constitute a substitute for advice that takes into account the data and the special needs of each person. In publishing the information in this review, there is no recommendation or opinion regarding the execution of any transaction or investment in securities, including the purchase and / or sale of securities. It should be emphasized that for any information of any kind that appears in the review – each person must perform additional testing and verification, taking into account his data and special needs. It should be noted that the information may contain errors and that market changes and / or other changes may apply to it, and that significant deviations may also be discovered between the forecasts and analyzes that appear in the actual situation. Therefore, making any decision based on a fact, opinion, opinion, forecast or analysis that appears in the review – is the sole responsibility of the reader.