contentSlug

type

ContentSlug_ContentQuery

slug

ContentPageContentQuery

content

trendingContent

query ContentSlug_ContentQuery(
  $contentSlug: String!
  $type: [ContentType!]
) {
  ...ContentPageContentQuery_13QmVO
}

fragment CompanyDetails_Content on Content {
  __isContent: __typename
  companies {
    name
    description
    pageUrl
    id
  }
}

fragment ContentBasicInfo on Content {
  __isContent: __typename
  id
  type
  title
  lang
  companies {
    viewerIsFollowing
    id
    name
    pageUrl
  }
  tags {
    viewerIsFollowing
    id
    name
    pageUrl
  }
  ...PublishingDetails
  ...Reactions
}

fragment ContentMetadata on Content {
  __isContent: __typename
  type
  title
  lang
  pageUrl
  alternatePageUrls: translations {
    __typename
    pageUrl
    lang
  }
  imgUrl
  description
  ... on Video {
    liveTime
    videoUrl
  }
  ... on Webcast {
    liveTime
    videoUrl
  }
}

fragment ContentPageContentQuery_13QmVO on Query {
  content(slug: $contentSlug, type: $type) {
    __typename
    id
    type
    title
    isPremium
    lang
    htmlBody
    summary
    companies {
      forum {
        latestPosts {
          ...ForumPosts
        }
      }
      name
      id
      viewerIsFollowing
      pageUrl
      defaultInstrument {
        isin
        id
        marketOpen
        marketClose
        marketplace {
          region
        }
        returns {
          total
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      }
    }
    tags {
      viewerIsFollowing
      id
      name
      pageUrl
    }
    createdAt
    ... on Video {
      liveTime
    }
    ... on Webcast {
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    slug
    ... on CompanyReport {
      reportUrl
    }
    ... on ThirdPartyCompanyReport {
      reportUrl
    }
    ... on StockExchangeRelease {
      reportUrl
    }
    ...ContentBasicInfo
    ...ContentMetadata
    ...PriceAndRecommendation_Content
    ...CompanyDetails_Content
    ...ReportLink_Content
    ...KeyFigures_Content
  }
  ...TrendingContent_1jQ2Cn
}

fragment ForumPosts on ForumPost {
  text
  likesCount
  url
  author
  postedAt
  authorImgUrl
}

fragment KeyFigures_Content on Content {
  __isContent: __typename
  companies {
    defaultInstrument {
      estimateData {
        modelType
        reportingCurrency
      }
      snapshot {
        transaction {
          date
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          estimates {
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            sharePrice
            nav
            navPerShare
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          }
        }
      }
      id
    }
    id
  }
}

fragment PriceAndRecommendation_Content on Content {
  __isContent: __typename
  createdAt
  companies {
    name
    pageUrl
    defaultInstrument {
      priceData {
        tradeCurrency
      }
      snapshot {
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        transaction {
          date
          recommendation
          targetPrice
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        prevTransaction {
          recommendation
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      }
      id
    }
    id
  }
}

fragment PublishingDetails on Content {
  __isContent: __typename
  createdAt
  publishers {
    name
    imgUrl
  }
  authors {
    __typename
    id
    name
    slug
    imgUrl
    jobTitle
  }
  ... on Video {
    liveTime
  }
  ... on Webcast {
    liveTime
  }
}

fragment Reactions on Content {
  __isContent: __typename
  id
  reactionGroups {
    reactionType
    reactionsCount
    viewerReacted
  }
}

fragment ReportLink_Content on Content {
  __isContent: __typename
  type
  isPremium
  ... on CompanyReport {
    reportUrl
  }
  ... on ThirdPartyCompanyReport {
    reportUrl
  }
  ... on StockExchangeRelease {
    reportUrl
  }
}

fragment TrendingContent_1jQ2Cn on Query {
  trendingContent(type: ARTICLE) {
    __typename
    id
    title
    lang
    pageUrl
    createdAt
    type
    imgUrl
    companies {
      squareLogoUrl
      name
      id
    }
    authors {
      __typename
      imgUrl
      id
    }
    publishers {
      imgUrl
    }
  }
}


neste-margins-renewable-products-under-pressure

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Co. Head of Research

Petri Gostowski

Neste produces transport fuel and renewable fuels. Today, the largest operations and extraction are held in the Nordic market, where the company is active in the entire value chain, from extraction to delivery to port depots. In addition, the opportunity is given for direct sales where customers can pick up fuel at selected stations. The largest market is in the Nordic region, and the company is headquartered in Espoo, Finland.

Oil is still not the problem in Europe; refineries in Europe are getting enough oil, but capacity hasn’t been increased, so Russian diesel has been replaced with Middle Eastern diesel. Once the route opens, this problem will be resolved very quickly as the stored diesel is loaded and shipped to Europe.

The war in Ukraine and a war in Iran are fundamentally different in nature. However, the Middle East as a region accounts for a third of global oil production compared to the Ukrainian region. Therefore, a market disruption in the Middle East can be much more far-reaching than in the case of Ukraine.

After the start of the war in Ukraine, the price of diesel returned to pre-war levels in about a year; one might perhaps draw some conclusions from this. Estimating the duration of individual crises (the war in Ukraine, a war with Iran) is very difficult and involves a lot of guesswork. Therefore, I don’t include such cases in my own calculations; instead, I reflect on the stock’s attractiveness in a hypothetical normal situation. Hardly anyone in 2022 probably thought the war in Ukraine would last this long with no end in sight. On the other hand, Russia’s boots are much deeper in the swamp of war than those of the United States. Trump has not traditionally been very long-term in his actions, but the matter must also be assessed from Israel’s perspective, as Netanyahu’s support rests on foreign policy projects. My own view is that warfare will continue in the future more on Israel’s initiative than on that of the United States. So, what is that normal level? Forecasts from American and European analyst firms suggest that the renewable diesel refining margin will settle at $500–700 per ton. I have also based my own future calculations on this. In other words, I’m watching for more favorable buying opportunities, provided the market fog clears and we see downward corrections in the future. I certainly don’t want to shut down discussion on acute crises, but I wanted to bring a slightly longer-term perspective into the conversation.

Thanks for the great explanation. I was still wondering, if the war ends within a couple of weeks and oil starts flowing again, will that increased diesel margin impact still extend through the whole of 2026? In other words, how long after the crisis can one expect it to take for margins to stabilize?

Good and tricky questions at the same time  Behind the rise is especially the fact that as a result of the turmoil that started in Iran, diesel prices have risen significantly. This has led to the diesel production margin going through the roof, so to speak, which flows directly into the Oil Products margin. Another significant benefit from Neste’s perspective is that the price of diesel is used in the pricing of Renewable Products, and thus its rise also trickles down to the Renewable Products’ sales margin. The tricky part is that it is very difficult to estimate how long the current blockage in the Strait of Hormuz will last. In short, one could say that if that war in Iran ended and oil started flowing through the strait normally tomorrow, the impact of such a momentary margin spike would remain small, although it would certainly raise short-term margins. On the other hand, if the situation is prolonged, the margin impact lasts longer and raises the full-year result quite significantly. In my opinion, however, it is quite reasonable to assume that this will not become a very long crisis, and therefore it’s not justified to extrapolate high margins over a time frame longer than, for example, the current year. This, therefore, limits the impact of margin spikes in terms of the overall investment thesis. At the same time, it should be mentioned that due to Neste’s large Rotterdam expansion investment, the margin spikes seen now strengthen the company’s free cash flow, which is particularly positive at this moment. In the previous report, I crunched the numbers on the longer-term valuation of Renewable Products, and with the parameters at the time, it was about 10x EV/EBIT based on the 2028 earnings forecast. Now, if all other assumptions are kept the same and the share price increase is taken into account, that multiple is a bit over 12x. This does not take into account the cash flow strengthening as a result of the margin spike seen now, the scale of which again depends on how long the current situation continues. In my opinion, that 12x EV/EBIT is not particularly high for Renewable Products, but on the other hand, considering the market for renewables, I’m inclined to believe that with current assumptions, that multiple won’t stretch significantly upwards from there in the long run unless the outlook changes such that the market is believed to be supply-constrained in the long term, which would also raise margin expectations for the longer term. On a few occasions, I have pointed out that the market situation for both Oil Products and Renewable Products is such that the risk of increased margin volatility has risen. I certainly didn’t expect quite this kind of a roller coaster, and I have to say that forecasting is pretty damn difficult right now

Should a positive profit warning have been issued by now, or is it an overreaction and total fluff?

It would be nice to hear some views from @Petri_Gostowski regarding the recent share price rise—how much “air” is in Neste right now, and can the current price levels be justified in any way based on the business outlook? I bet quite a few investors are in the same situation as I am: we bought under ten when it was so “cheap,” but now we’re watching this flight with our mouths open, wondering if there is any sense in this anymore. The latest analyst comment was probably from early February; quite a lot has happened in the world since then, and it would be nice to hear how much “windfall” is in the price and what is generally expected from Neste at the current price level. Or in short, how good does the analyst think the expected return is at the current price?

Neste

Neste's Q2 results were well below our expectations and the near-term outlook in Renewable Products, which was also affected by the challenges in Singapore, brought our estimates down significantly for the rest of the year. We also scaled up our medium-term projections for the sales margin of Renewable Products in the light of the change in Sweden's blending mandate and threats to supply growth. However, we expect the segment's earnings growth to remain buoyant as production capacity increases. 

<p>Neste's Q2 results were well below our expectations and the near-term outlook in Renewable Products, which was also affected by the challenges in Singapore, brought our estimates down significantly for the rest of the year. We also scaled up our medium-term projections for the sales margin of Renewable Products in the light of the change in Sweden's blending mandate and threats to supply growth. However, we expect the segment's earnings growth to remain buoyant as production capacity increases. </p> 

	2022	23e	24e
Revenue	25,707.4	21,205.5	23,630.0
growth-%	69.7 %	-17.5 %	11.4 %
EBIT (adj.)	2,898.0	2,135.4	2,311.7
EBIT-% (adj.)	11.3 %	10.1 %	9.8 %
EPS (adj.)	3.02	2.35	2.37
Dividend	1.52	1.10	1.15
Dividend %	3.5 %	4.0 %	4.2 %
P/E (adj.)	14.3	11.8	11.7
EV/EBITDA	11.3	10.0	7.2

Neste: Margins for Renewable Products under pressure

Key Estimate Figures27.07.2023

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