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1、Deutsche Bank Markets Research Global Emerging Markets Brazil Oil high political risk * Certainty that new management is implementing a strategy that is market friendly. * Upside potential from secondary recovery * Growth plan execution risk is high * Valuation attractive * Argentina macro situation
2、 is worrisome HRT * Vast resource base * Exposure to frontier areas * The farm down of the Namibian assets is a minor trigger. Nimrod prospects drilling results (Oct). HRT needs commercial oil finds in Solimoes. * Experienced management * Discovery track record is poor * Cash position enough for 201
3、2-13 * Need for financing could prove challenging Petrobras Argentina * Some exposure to unconventional * Some concessions are close to expire * Price liberalization and the definition of a growth strategy for the company. * Upside potential in natural gas * Refining prices are controlled * Sound ba
4、lance sheet * Lack of strategy OGX * Diversified portfolio * Aggressive targets end up in frustration * More visibility on the companys projects (Campos basin fields need to be declared commercial by Mar-13), capex and production targets. * Positive track record on exploration * Uncertainty regardin
5、g resource base * Experienced management team * Turned net debt in 1Q12 Source: Deutsche Bank. 17 September 2012 Oil a marginal beneficiary from the Brazilian governments stimulus measures We reiterate our Hold rating on Braskem as demand outlook remains poor. The stimulus initiatives recently annou
6、nced by the Brazilian government should help improve domestic demand for petrochemicals, but they are unlikely to fully compensate for lackluster global economic activity. High-beta stock Braskem has also benefited from recent market inflows but sustainable positive performance of the shares remain
7、a function of global economy and its impact on demand. Demand: seasonal pick-up in 3Q. After that, visibility is low Management expects demand to show a solid QoQ growth in 3Q, due to seasonality, as shown on Figure 19. However, this years growth will be somewhat subdued versus historical levels, al
8、though still at double digits (for resins. For PVC, management expects low single digit QoQ growth). There is little visibility on demand in 4Q and 2013 at this point. Management stated that only after 3Q, the company should have a better idea of how demand should behave next year. Figure 19: Braske
9、m sales volumes (k tons) Figure 20: Braskem capacity utilization rates 0 500 1,000 1,500 2,000 2,500 3,000 1Q10A2Q10A3Q10A4Q10A1Q11A2Q11A3Q11A4Q11A1Q12A2Q12A3Q12E PolyolefinsInternationalVinylsBasic Petchems 0% 20% 40% 60% 80% 100% 120% 2Q10A3Q10A4Q10A1Q11A2Q11A3Q11A4Q11A1Q12A2Q12A3Q12E PolyolefinsI
10、nternationalVinylsBasic Petchems Source: Deutsche Bank and company reports. Source: Deutsche Bank and company reports. Government stimulus measures: direct and indirect beneficiary, but overall impact is limited The Brazilian government implemented several initiatives to strengthen the countrys econ
11、omic activity and improve local industrys competitiveness. ? Increase in import taxes: early September, the government announced a plan to raise import taxes of selected products. For Braskem, the initiative will impact the imports of polyethylene. A few points we would like to highlight: (1) as sho
12、wn on Figure 21 and Figure 22, PE imports were negatively impacted by the appreciation of the Real during 2Q; therefore we should consider 2Q12 17 September 2012 Oil 2) softening of global demand for oil 3) longer-than-expected weakness in Canada drilling; and 4) volatile oil and natural gas prices
13、as they affect stock performance. Petrobras Valuation = Our PT is derived using DCF analysis. Our DCF assumptions include a US$110/barrel long term oil price forecast. We use the DCF methodology because we consider it a superior indicator of value to multiples, as it relies on free cash flows genera
14、ted over a longer period of time rather than the profitability of a single year. Our WACC of 10.1% is based on 30% leverage and 9.2% after-tax cost of debt. We also assume 10.4% cost of equity based on a 1.9% sovereign risk premium that reflects Brazils risk improvement over the past year, a 3.0% ri
15、sk free rate and a 5.5% equity risk premium (historical average), along with a 1.0 Beta to the local market and a 3.0% terminal growth rate (which is below long term inflation expectations for Brazil). Risk = Upside risks to our Hold recommendation include: 1) sooner-than-expected recovery in oil pr
16、ices and 2) increased flows into Emerging markets, which tend to benefit Petrobras due to its high liquidity. Downside risks include: 1) lower-than- expected oil prices, 2) delays in Petrobras execution of the production schedule, 3) interference from Petrobras main shareholder, the Brazilian govern
17、ment, and 4) Brazilian macroeconomic factors. BAK Valuation = Our PT is derived using DCF analysis. We use the DCF methodology because we consider it a superior indicator of value to multiples, as it relies on free cash flows generated over a longer period of time rather than the profitability of a
18、single year. Our WACC of 11.8% is based on 50% leverage and 9.2% after-tax cost of debt. We also assume 14.3% cost of equity based on a 5.0% sovereign risk premium, a 4.5% risk free rate and a 5.3% equity risk premium (historical average), along with a 0.9 Beta to the local market. We conservatively
19、 apply a zero terminal growth rate. Risks = The main upside risks to our rating are: (1) quicker macro economic recovery which will impact demand and prices, (2) accretive acquisitions and (3) quicker resolution of the ICMS tax exemptions for imports in Brazil. The main downside risks to our rating
20、are: (1) further price weakening, (2) stronger-than-expected appreciation in the Real and (3) further deterioration of economic activity in Brazil. 17 September 2012 Oil as a result, the recommendations may differ and the price targets and estimates of each may vary widely. In August 2009, Deutsche
21、Bank instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for “Hold“ rated stocks having a market cap smaller than most other companies in its sector or region. We beli
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