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Hellenic Petroleum (ELPE) owns three refineries (accounting for 65% of total Greek refinery output), while having a substantial marketing and chemicals presence. Although we believe the European refining market to be challenging in the long term, short-term regulation changes (on sulphur in 2020) should support demand for products from complex, middle distillate-focused refineries like Hellenic’s. The cyclical macro environment will likely present challenges but ELPE has a strong balance sheet and should generate free cash flow in the coming years, which may be usefully deployed. We use a mix of 2018e P/E, EV/EBITDA and a longer-term DCF approach to value ELPE at €9.3/share, representing c 9% upside to the current share price.

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