Summary
Orlen is a large oil refinery and energy business focused on the Polish market. Key infrastructure, including pipelines, refineries and power networks, make the business challenging to dislocate but doesn’t give it a cost advantage. The crude market has been in turmoil since Russia invaded Ukraine. Over the next few years, it will stabilise. Crack spreads will shrink, and Orlen’s revenues and margins will fall alongside them. Reliance on Rosneft’s oil will hurt as the company sources barrels elsewhere, particularly from Aramco and Exxon.
Stock: Polski Koncern Naftowy ORLEN Spólka Akcyjna
Ticker: WSE: PKN
Date: August 31, 2022
Market cap: zł38.3bn
Rating: Buy
Price: zł61.00
Target: zł92.00
Setting the stage
Orlen is a Polish oil, energy, and fuel business. The company makes money by refining oil, selling fuel, generating electricity, and producing petrochemicals (these are byproducts of oil used for plastics and fertilisers). It is the largest petrochemical business in Central and Easter…