Rating Date Company Buy Tupras - Anasayfa - Tüpraş · Rating Date Buy Emerging Europe Turkey Oil & Gas Oil Services Company Tupras 9 December 2015 Recommendation ... Net debt/equity

Deutsche Bank Markets Research

Rating

Buy Emerging Europe

Turkey

Oil & Gas

Oil Services

Company

Tupras

Date

9 December 2015

Recommendation Change

Robust FCF and dividend yield outlook; upgrading to Buy

Reuters Bloomberg Exchange Ticker TUPRS.IS TUPRS TI IST TUPRS

Recent weakness offers an attractive entry point to multi-year c.13% FCF yield

________________________________________________________________________________________________________________

Deutsche Bank AG/London

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015.

Price at 8 Dec 2015 (TRY) 69.80

Price Target (TRY) 80.90

52-week range (TRY) 78.45 - 49.65

Koray Pamir

Research Analyst

(+90) 212 3190327

[email protected]

Key changes

Rating Hold to Buy ↑

Target Price 75.00 to 80.90 ↑ 7.9%

Source: Deutsche Bank

Price/price relative

30

40

50

60

70

80

12/12 6/13 12/13 6/14 12/14 6/15

Tupras

ISE National 100 Ind (Rebased)

Performance (%) 1m 3m 12m

Absolute -10.6 -0.6 40.1

ISE National 100 Index -9.8 2.6 -12.9


We are upgrading our rating for Tupras to Buy from Hold. We increase our 12M total return target by 5% to TRY85.0 (12M target price:TRY80.9, DPS: TRY4.1), implying a potential 12M total return of 22%. We base our rationale on: 1) a more positive house view on the European refining market; 2) Tupras’ shares having declined by 11% in USD terms, underperforming the BIST-100 and BIST-Industrials by 5% since late October; 3) decline in EV/EBITDA premium vs. peers; 4) superior FCF yield (c.13% for FY16E-FY20E) and dividend yield (9% yield on average in FY16E-FY20E); and 5) more appealing valuation with the shares trading at a FY16E EV/EBITDA of 6.6x and P/E of 8.0x.

Following a superior 2015, we are more constructive on 2016 refining outlook Surging demand, not least for gasoline, unexpected downtime and delayed start-ups all played a role in ensuring that 2015 will likely be the best year for Europe’s refiners since the end of the so-called ‘Golden Age’. Looking into 2016, our strong suspicion is that with the surge in 2015 demand growth abating, stock levels rising and capacity building (not least in the US), the environment will turn down. Intuitively, margins akin to those seen in 2015 are not sustainable. However, there are caveats, not least of which is the impact of potentially raised maintenance activity on average capacity, and the unpredictable risk that an Atlantic Basin refining system that has been operating at near-effective capacity will see unexpected downtime. Overall, as we look into 2016, our expectation is that margins will prove to be more subdued. However, absent a collapse in demand, in a market that, from a supply/demand perspective, looks relatively finely poised and where some of the structural issues that had undermined European competitiveness have eased, we do not foresee a return to the misery of 2013.

13% FCF, 9% div. yield outlook superior to most BIST-Industrials and peers With Tupras having reached peak capex over the USD3bn RUP investment cycle, we expect it to attain a robust FCF profile (c.13% avg. yield FY16-FY20), visibly higher than the BIST-Industrials average of 4% and 7% for regional peers. In addition, resumption of sizable dividends (a c.9% dividend yield on average between FY16E and FY20E) is one of the stock’s key attractions.

Moderation in strong share performance offers attractive entry point Tupras has been one of the strongest performing stocks on BIST-100 ytd. The shares outperformed BIST-100 and BIST-Industrials by 56% and 40% between the beginning of the year and late October due to the launch of the RUP kick-off, a weak TRY and supportive regional margins. However, the shares have underperformed the BIST-100 and BIST-Industrials by 5% and regional peers (PKN, MOL etc.) by 12%, mainly due to the higher risk premia attached to Turkish equities, volatility in crude oil prices and a decline in margins into 4Q15. Accordingly, on the basis of a more constructive outlook into 2016 and superior FCF and dividend yield profile, we see the recent weakness as an attractive entry point to the shares; upgrading to Buy. We value Tupras through a USD based DCF model. The downside risks:1) weaker-than-expected Med Basin refining margins; 2) a supply shock-related rise in crude oil prices; 3) rise in competition; and 4) regulatory risks.

9 December 2015

Oil Services

Tupras

Page 2 Deutsche Bank AG/London

Model updated:08 December 2015

Running the numbers

Emerging Europe

Turkey

Oil & Gas

Tupras Reuters: TUPRS.IS Bloomberg: TUPRS TI

Buy Price (8 Dec 15) TRY 69.80

Target Price TRY 80.90

52 Week range TRY 49.65 - 78.45

Market Cap (m) TRYm 17,479

USDm 5,994

Company Profile

Tupras, acquired by Koc Holding in 2006, is the only refining company in Turkey. It produces LPG, naphtha, diesel, fuel oils and asphalt among other products. The refining operations are conducted in four sites (Izmit, Izmir, Kirikkale and Batman) around Turkey with a total capacity of 560kbbl/day (28.1m tons per annum). Nelson complexity of Tupras has increased to 9.9 from 7.2 following the completion of the RUP (Residuum Upgrade Project) as of 2Q15, higher than c.8.0 for the European refiners.

Price Performance

30

40

50

60

70

80

Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15

Tupras ISE National 100 Index (Rebased)

Margin Trends

0

2

4

6

8

10

12 13 14 15E 16E 17E

EBITDA Margin EBIT Margin

Growth & Profitability

05101520253035

-10-505

10152025

12 13 14 15E 16E 17E

Sales growth (LHS) ROE (RHS)

Solvency

0

2

4

6

8

10

020406080

100120140

12 13 14 15E 16E 17E

Net debt/equity (LHS) Net interest cover (RHS)

Koray Pamir

+90 212 3190327 [email protected]

Fiscal year end 31-Dec 2012 2013 2014 2015E 2016E 2017E

Financial Summary

DB EPS (TRY) 5.85 4.78 5.83 7.65 8.77 9.73

Reported EPS (TRY) 5.85 4.78 5.83 7.65 8.77 9.73

DPS (TRY) 3.85 1.58 0.00 4.10 7.46 8.27

BVPS (TRY) 19.4 20.3 24.5 27.0 31.1 34.6

Weighted average shares (m) 250 250 250 250 250 250

Average market cap (TRYm) 10,391 11,726 11,843 17,479 17,479 17,479

Enterprise value (TRYm) 11,385 14,595 15,700 25,771 24,878 24,283

Valuation Metrics P/E (DB) (x) 7.1 9.8 8.1 9.1 8.0 7.2

P/E (Reported) (x) 7.1 9.8 8.1 9.1 8.0 7.2

P/BV (x) 2.66 2.11 2.26 2.58 2.24 2.02

FCF Yield (%) 11.1 8.6 9.8 nm 14.7 14.7

Dividend Yield (%) 9.3 3.4 0.0 5.9 10.7 11.8

EV/Sales (x) 0.3 0.4 0.4 0.7 0.6 0.5

EV/EBITDA (x) 9.1 14.4 19.9 7.9 6.6 6.4

EV/EBIT (x) 11.1 18.9 29.6 9.2 7.7 7.5

Income Statement (TRYm)

Sales revenue 42,437 41,078 39,723 37,169 44,200 49,582

Gross profit 1,913 1,714 1,521 4,400 5,065 5,167

EBITDA 1,247 1,014 789 3,256 3,748 3,807

Depreciation 222 240 258 459 536 563

Amortisation 0 0 0 0 0 0

EBIT 1,025 774 531 2,797 3,212 3,244

Net interest income(expense) 101 -110 -235 -307 -392 -360

Associates/affiliates 0 0 0 0 0 0

Exceptionals/extraordinaries 0 0 0 0 0 0

Other pre-tax income/(expense) 224 -651 -112 -714 -249 -35

Profit before tax 1,350 13 184 1,776 2,571 2,849

Income tax expense -121 -1,186 -1,286 -153 358 397

Minorities 7 2 11 14 16 16

Other post-tax income/(expense) 0 0 0 0 0 0

Net profit 1,464 1,197 1,459 1,916 2,197 2,436

DB adjustments (including dilution) 0 0 0 0 0 0

DB Net profit 1,464 1,197 1,459 1,916 2,197 2,436

Cash Flow (TRYm)

Cash flow from operations 2,886 3,724 3,757 -404 3,247 3,278

Net Capex -1,728 -2,715 -2,594 -1,023 -684 -711

Free cash flow 1,158 1,009 1,163 -1,426 2,562 2,568

Equity raised/(bought back) 0 0 0 0 0 0

Dividends paid -985 -964 -396 0 -1,027 -1,868

Net inc/(dec) in borrowings 1,908 2,276 1,214 2,980 1,489 -843

Other investing/financing cash flows -76 -1,919 -1,755 -2,960 -639 -105

Net cash flow 2,005 402 225 -1,407 2,386 -248

Change in working capital 1,518 1,524 1,681 -3,813 -143 -132

Balance Sheet (TRYm)

Cash and other liquid assets 3,262 3,663 3,888 2,482 4,868 4,619

Tangible fixed assets 5,846 8,322 10,636 11,200 11,349 11,497

Goodwill/intangible assets 40 39 60 60 60 60

Associates/investments 4 4 4 6 7 8

Other assets 7,496 9,111 7,288 12,188 13,101 13,934

Total assets 16,648 21,139 21,876 25,937 29,385 30,118

Interest bearing debt 4,256 6,532 7,745 10,725 12,214 11,371

Other liabilities 7,503 9,469 7,934 8,384 9,314 10,030

Total liabilities 11,758 16,001 15,680 19,110 21,528 21,401

Shareholders' equity 4,847 5,094 6,141 6,772 7,798 8,657

Minorities 43 45 56 55 59 60

Total shareholders' equity 4,890 5,139 6,197 6,827 7,857 8,717

Net debt 994 2,868 3,857 8,244 7,346 6,751

Key Company Metrics

Sales growth (%) 4.1 -3.2 -3.3 -6.4 18.9 12.2

DB EPS growth (%) 23.7 -18.2 21.9 31.3 14.7 10.9

EBITDA Margin (%) 2.9 2.5 2.0 8.8 8.5 7.7

EBIT Margin (%) 2.4 1.9 1.3 7.5 7.3 6.5

Payout ratio (%) 65.8 33.1 0.0 53.6 85.0 85.0

ROE (%) 31.8 24.1 26.0 29.7 30.2 29.6

Capex/sales (%) 4.1 6.6 6.5 2.8 1.5 1.4

Capex/depreciation (x) 7.8 11.3 10.0 2.2 1.3 1.3

Net debt/equity (%) 20.3 55.8 62.2 120.7 93.5 77.4

Net interest cover (x) nm 7.0 2.3 9.1 8.2 9.0

Source: Company data, Deutsche Bank estimates

9 December 2015

Oil Services

Tupras

Deutsche Bank AG/London Page 3

Upgrading to Buy; multi-year 13% FCF yield at FY16E P/E of 8.0x following an 11% decline in USD terms

Recent weakness offers an attractive entry point to multi-year 13% FCF yield

We are upgrading our rating for Tupras to Buy from Hold. We increase our 12M

total return target by 5% to TRY85.0/share (12M target price:TRY80.9/share,

DPS: TRY4.1), implying a 22% total return potential. Our reasoning for the

upgrade is based on: 1) our more positive house view on the European refining

market into 2016 on abundant crude oil keeping feedstock prices in check and

decent demand; 2) Tupras’ shares having declined by 11% in USD terms,

underperforming the BIST-100 and BIST-Industrials by 5% and regional peers by

12% since late October due to short-term challenges and top-down risk-off mode

for Turkish assets given the escalation of geopolitical challenges; 3) share

premium vs. peers having relatively normalized, the richness of which was one

of the key reasons for our prior Hold rating for the shares; 4) superior FCF yield

(c.13% between FY16E and FY20E) and dividend yield (9% yield on average

between FY16E and FY20E) vs. peers and Turkish industrials and 5) more

appealing valuation following the recent underperformance with the shares

trading at a FY16E P/E of 8.0x and EV/EBITDA of 6.6x, and FY16E-FY20E average

13% FCF yield and 9% dividend yield.

We believe that the sell-off in the shares triggered by the broader market offers

an attractive entry point, as 2016 should be the first year that the RUP will be

fully online against a supportive (albeit not as strong as the exceptional margins

in 2015) operating backdrop; which should mark the start of the delivery of

multi-year superior FCF (13%) and dividend yield (9%).

Figure 1: CRKS321B index progression Figure 2: Brent crude oil progression (USD/bbl.)

14.0

11.2

10.3

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016

CRKS321B Index 1Y Average 3Y Average 5Y Average

44

55

88

95

40

60

80

100

120

140

1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016

EUCRBRDT Index 1Y Average 3Y Average 5Y Average

Source: Deutsche Bank. Bloomberg Finance LP


Accordingly, we expect Tupras to attain USD1.2bn p.a. of EBITDA in FY16 to

FY18 and a refining margin of USD11.7 per bbl. Tupras’ execution of increasing

CUR across its refineries has been strong, which should lead to a CUR of 98%

between FY16E andFY18E and buoy results through lowering unit costs as well.

Thus, we raise our FY16E EBITDA for Tupras by 17% to TRY3.7bn (7% higher

than consensus) and FY17E EBITDA by 22% to TRY3.8bn (9% higher than

consensus) on the assumption of more supportive regional refining

environment, coupled with an improvement in Tupras’ CUR post the RUP

investment.

https://ger.gm.cib.intranet.db.com/ger/document/pdf/0900b8c08a549e5f.pdf

9 December 2015

Oil Services

Tupras


Following an excellent 2015, we are more constructive on 2016 refining

outlook

Surging demand, not least for gasoline, unexpected downtime and delayed

start-ups all played a role in ensuring that 2015 will likely be the best year for

Europe’s refiners since the end of the so-called ‘Golden Age’. Looking into

2016, our strong suspicion is that with the surge in 2015 demand growth

abating, stock levels rising and capacity building (not least in the US), the

environment will turn down. Intuitively, margins akin to those seen in 2015 are

not sustainable. However, there are caveats, not the least of which is the

impact of potentially raised maintenance activity on average capacity and the

unpredictable risk that an Atlantic Basin refining system that has been

operating at near effective capacity will see unexpected downtime. Overall, as

we look into 2016, our expectation is that margins will prove to be more

subdued. However, absent a collapse in demand in a market that looks

relatively finely poised from a supply/demand perspective and where some of

the structural issues that had undermined European competitiveness have

eased, we do not foresee a return to the misery of 2013.

Figure 3: European gasoline cracks ($/bbl) Figure 4: Refining utilisation rates

-10

-5

0

5

10

15

20

25

30

35

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/bbl Range (2011-14) 2015

YTD gasoline cracks of $13.5/bbl compare with 5-yr average of $6/bbl - accounting for c$3/bbl of the uplift to NWE cracks

70.0

75.0

80.0

85.0

90.0

95.0D

ec-9

9

Jun-0

0

Dec-0

0

Jun-0

1

Dec-0

1

Jun-0

2

Dec-0

2

Jun-0

3

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Dec-1

2

Jun-1

3

Dec-1

3

Jun-1

4

Dec-1

4

Jun-1

5

% Utlisation

OECD North America - 12-mth rolling OECD Europe - 12-mth rolling

European utilization recovered dramatically in 2015 rising to 88% as global demand accelerated but helped by modest capacity closures, unexpected outages and high gasoline margins. Overall Atlantic Basin utilization stood at levels not seen since 2008.

Euro Oct 15 (88%)

US Oct 15 (90%)

Source: Deutsche Bank, Diio Mi


Accordingly, we anticipate Tupras to achieve USD1.2bn of EBITDA p.a. in FY16

to FY18 and a ref. margin of USD11.7 per bbl. Tupras’ execution of increasing

CUR across its refineries has been successful, which should lead to a CUR of

98% between FY16E and FY18E and buoy financials through lower unit costs.

Figure 5: Tupras’ gross ref. margin & EBITDA forecasts Figure 6: Tupras’ CUR progression, %

1,0

66

740

945

1,2

91

696

568

524

1,1

96

1,2

12

1,2

06

0

2

4

6

8

10

0

300

600

900

1,200

1,500

2008 2010 2012 2014 2016E

EBITDA (USDm) (LHS)Tupras Net refining margin (USD/bbl.)

99%

98%

84%

40%

55%

70%

85%

100%

2001 2003 2005 2007 2009 2011 2013 2015E2017E

Total CUR CUR on Crude, %

FY01-FY14 Average Source: Deutsche Bank, Company data

Source: Deutsche Bank, Company data

9 December 2015

Oil Services

Tupras


13% FCF, 9% div. yield outlook, superior to most BIST-Industrials and peers

With Tupras having reached peak capex over the USD3bn RUP investment

cycle, we expect Tupras to attain a robust FCF profile (c.13% yield on average

between FY16 and FY20), visibly higher than the BIST-Industrials average of

4% and 7% for regional peers. In addition, a resumption of sizable dividends

(c.9% dividend yield on average between FY16E and FY20E) is one of the

stock’s key attractions.

Figure 7: Tupras’ FCF & FCF yield progression (%) Figure 8: Tupras’ DPS progression and yield, %

4%

14%

10%

-13%

13% 13% 13%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-1,200

-800

-400

0

400

800

1,200

2012/1

2

2013/1

2

2014/1

2

2015/1

2

2016/1

2

2017/1

2

2018/1

2

FCF (USDm) FCF Yield, % (RHS)

7%6%

12%

11%

8%9%

16%

11%

7%7%8%9%

3%

0%

6%

11%

0%

4%

8%

12%

16%

0

1

2

3

4

5

2002 2004 2006 2008 2010 2012 2014 2016E

TRY

DPS (TRY/share) Dividend Yield, %


Source: Deutsche Bank estimates. Bloomberg Finance LP

Moderation in strong share performance offers attractive entry point

Tupras has been one of the strongest-performing stocks on the BIST-100 ytd.

The shares outperformed the BIST-100 and BIST-Industrials by 56% and 40%

between the beginning of the year and late October due to RUP kick-off, a

weak TRY and supportive regional margins.

Figure 9: Tupras’ share performance vs. XU100 & XUSIN Figure 10: Crack spread vs. Tupras’ share price

20

40

60

80

40,000

60,000

80,000

100,000

07/13 07/14 07/15XUSIN XU100 TUPRS

0

5

10

15

20

25

30

0

5

10

15

20

25

30

01/14 07/14 01/15 07/15 01/16CRKS321B Index Tupras Share Price (USD)

Source: Deutsche Bank. Company data


However, the shares have underperformed the BIST-100 and BIST-Industrials

by 5% and regional peers (PKN and MOL etc.) by 12%, mainly due to the

higher-risk premia attached to Turkish equities, volatility in crude oil prices and

a decline in margins into 4Q15. Accordingly, the shares are trading at a minor

discount on a P/E basis and a premium of 20% on an EV/EBITDA basis, which

rose as high as 40% over the preceding months. Thus, on the basis of a more

constructive outlook into 2016 and superior FCF and dividend yield profile, we

view the recent weakness as an attractive entry point to the shares.

9 December 2015

Oil Services

Tupras


European refining

Demand, maintenance and pressures on the system offer comfort; stocks and capacity build work against

Surging demand, not least for gasoline, unexpected downtime and delayed

start-ups all played their role in ensuring that 2015 will have been the best year

for Europe’s refiners since the end of the so-called ‘Golden Age’. Looking into

2016, our strong suspicion is that with the surge in 2015 demand growth

abating, stock levels rising and capacity (not least in the US) building, the

environment will turn down. Intuitively, margins akin to those seen in 2015 are

not sustainable. However, there are caveats, not the least of which being the

impact of potentially raised maintenance activity on average capacity and the

unpredictable risk that an Atlantic Basin refining system that has been

operating at near effective capacity will see unexpected downtime. Overall, as

we look into 2016 our expectation is that margins will prove to be more

subdued. However, absent demand collapse in a market that looks relatively

finely poised from a supply/demand perspective and where some of the

structural issues that had undermined European competitiveness have eased,

we do not foresee a return to the misery of 2013. Importantly, five years of

reshaping and restructuring also argue that the major’s manufacturing asset

base is more resilient and the sources of downstream income more diverse

than investors have credited, a feature that has been hidden by a year in which

all boats have floated higher on the strongly rising tide.

Gasoline key. At $7.5/bbl above the average for the past five years,

gasoline cracks were responsible for the $2.5/bbl uplift to the 2015

average NWE GRMs.

Volumes enhanced. Not only were margins strong. European capacity

utilisation recovered by over 10pp to the high 80s, a level not seen

since 2008.

Figure 11: European gasoline cracks ($/bbl): Traditionally

Europe’s problem child, tight Atlantic Basin supply has

been ‘manna from heaven’

Figure 12: Not only were European margins higher given

gasoline cracks. Utilisation rates were dramatically

raised, aiding volume and cost recovery

-10

-5

0

5

10

15

20

25

30

35


$/bbl Range (2011-14) 2015

YTD gasoline cracks of $13.5/bbl compare with 5-yr average of $6/bbl - accounting for c$3/bbl of the uplift to NWE cracks

70.0

75.0

80.0

85.0

90.0

95.0

Dec-9

9

Jun-0

0

Dec-0

0

Jun-0

1

Dec-0

1

Jun-0

2

Dec-0

2

Jun-0

3

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Dec-1

2

Jun-1

3

Dec-1

3

Jun-1

4

Dec-1

4

Jun-1

5

% Utlisation

OECD North America - 12-mth rolling OECD Europe - 12-mth rolling

European utilization recovered dramatically in 2015 rising to 88% as global demand accelerated but helped by modest capacity closures, unexpected outages and high gasoline margins. Overall Atlantic Basin utilization stood at levels not seen since 2008.

Euro Oct 15 (88%)

US Oct 15 (90%)



This section of the report is an

excerpt from the “European

Integrated Oils: 2016 Outlook:

A Balancing Act” report

published by Lucas Hermann,

ACA and Tom Robison on 4

December 2015.

9 December 2015

Oil Services

Tupras


Looking back on 2015, gasoline is key but profitability is also supported by other features

Figure 13: The discount to WTI lessened markedly,

reducing US feedstock advantage and with it export

potential ...

Figure 14: ... at a time when a 4% increase in US

demand growth for gasoline ate all of the uptick in US

refining supply (H1’15/H1’14)

-5

0

5

10

15

20

25

30


$/bbl (Brent-WTI)

Range (2012-14) 2015

3%

-2%

4%

4%

1%

4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-50

0

50

100

150

200

250

300

350

LPG Naphtha Gasoline Kerosene/jet Gasoil Resid/other

Gro

wth

H1 1

5/H

1 1

4 %

Source: DataStream; Deutsche Bank

Source: EIA; Deutsche Bank

Figure 15: With the US market tight, US exports of gasoline fell modestly with

most focused on a LatAm market suffering its own outages

-500

-400

-300

-200

-100

0

100

200

300

400

500

600

Jan-2

001

Jul-

2001

Jan-2

002

Jul-

2002

Jan-2

003

Jul-

2003

Jan-2

004

Jul-

2004

Jan-2

005

Jul-

2005

Jan-2

006

Jul-

2006

Jan-2

007

Jul-

2007

Jan-2

008

Jul-

2008

Jan-2

009

Jul-

2009

Jan-2

010

Jul-

2010

Jan-2

011

Jul-

2011

Jan-2

012

Jul-

2012

Jan-2

013

Jul-

2013

Jan-2

014

Jul-2014

Jan-2

015

Jul-

2015

US net 12 month rolling

Europe 12 mth

West Africa 12 mth

LatAm 12mth

Source: EIA: Deutsche Bank

Figure 16: For Europe, in H1’15 US withdrawal from West African markets

and gasoline demand growth offered c.170kb/d of alternative outlets

North

America

Libya (11)

Egypt

Algeria

Singapore

Other

Mid East

Saudi

Brazil

Nigeria

South Africa

Other Africa

16

11

11

22

31

30

26

20

37

13

1160

US exports to

Mexico and

LatAm rose

materially

Source: Wood Mackenzie; Deutsche Bank

With the US market tight, US

exports of gasoline fell

modestly with most focused

on a LatAm market suffering

its own outages

For Europe, in H1’15 US

withdrawal from West African

markets and gasoline demand

growth offered c.170kb/d of

alternative outlets

9 December 2015

Oil Services

Tupras


Looking into 2016 we see risks but also signs of support

Capacity increases at a time of moderating demand are a worry, with

distillate margins under pressure, not least from the slowdown in

Chinese industrial markets and Middle East ramp-up. Overall,

nameplate additions of c.1.1mb (net), concentrated in China, are likely

to surpass demand growth forecast at c.1.0mb/d, although the timing

of the start-up and subsequent ramp-up will likely be important. As

increased Middle Eastern capacity ramped up through H2 2015, so too

are distillate margins likely to remain under pressure. As the capacity

build-up advances, this is likely to place increased pressure on H2’16

margins, not least if the capacity ramp-up coincides with a rising oil

price and slowing demand momentum.

Rising inventory levels, notably in gasoline, are less than supportive of

continued tightness in gasoline markets while increased distillate

inventories suggest additional pressure on distillate cracks in Europe.

The increase in US capacity at a time of normalising gasoline demand

growth is also likely to ease the tightness evident through this year in

gasoline markets.

More encouraging, the deferral of maintenance activity in 2015 and

the potential to take advantage of high GRMs suggest that downtime

in 2016 may be significantly higher, most notably across the Atlantic

Basin.

Similarly, with utilisation in the US running at over 90% in recent

months and European utilisation also at its highest run rate for six

years, the risks of unplanned outages have, in our opinion, increased,

not least given potential underinvestment in Europe across the 2010-

14 era.

For European refining currency moves, reduced fuel costs associated

with lower prices and a fall in the WTI-Brent spread should all continue

to support the relative competitive position of Europe vs. the US.

Figure 17: 2016 is expected to be a year of notable

capacity start-ups, not least in N America (largely

condensate) and China

Figure 18: IEA maintenance data: have deferrals been

evident? The data suggests 2016 maintenance could

prove more meaningful

-750

-500

-250

0

250

500

750

1000

1250

1500

1750

2000

2014 2015 2016 2017 2018

kb/d

additio

nal capacity n

am

epla

te

N America Europe Japan M East Asia

Latam Other Demand Net supply

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2009 2010 2011 2012 2013 2014 2015

Estim

ate

d a

nnual m

ain

tenance d

ow

ntim

e m

b/d

US Maintenance Europe Maintenance

Source: IEA; Wood Mackenzie; Deutsche Bank

Source: IEA; Deutsche Bank

9 December 2015

Oil Services

Tupras


Figure 19: European distillate margins have come under

increased pressure of late as Saudi capacity ramps and

Asia sees slower demand

Figure 20: With OECD Europe distillate days cover

moving to the upper end of its five-year range for days

cover

0

5

10

15

20

25

30

35


$/bbl Range (2011-14) 2015

30

32

34

36

38

40

42

44

46


Days Range 2010-12 2013 2014 2015

Source: DataStream; Deutsche Bank

Source: IEA; Deutsche Bank

European majors – better than they were?

The recovery in global refining margins, most particularly in Europe,

has most definitely proven to be a major source of support for

downstream income and cash flow across the European majors in

2015. On aggregate, downstream net income additions added c.$10bn

to group net income and similar to operating cash flow, which is in

essence the equivalent of a $10/bbl increase in the realised oil price

across the group.

The improvement in GRMs represented a very material component of

the uplift in overall downstream results. Taken on aggregate and using

company marker margins as a proxy, we estimate that close to $8bn

of the $10bn improvement in net income was as a consequence of the

improve in GRMs, not least of which were those in Europe.

However, push into the details at the super-majors, BP Total and Shell,

and a significant proportion of the downstream upside would appear

to have arisen from actions taken internally. In particular, after five

years of portfolio restructuring and reshaping the remaining

manufacturing portfolios, they would appear to be far better placed on

the industry cost curve, most particularly those in Europe. Overall, we

estimate that c.30% of often poorly placed and disadvantaged refining

capacity as it stood across these three has been curtailed since 2008

Looking into 2016, we expect refining income to fall materially, not

least as European margins retrace towards $4.0/bbl from $6.5/bbl in

2015. However, continued operational and cost progress should help

offset this.

9 December 2015

Oil Services

Tupras


Figure 21: European super-majors: The European cost curve shows the extent

to which the majors have focused on better-positioned refineries

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

201

3 W

ood

Ma

c N

CM

($

/bb

l)

Review of the actions across the majors emphaises that the assets that remain in portfolio have greater scale and importantly a demonstrated ability to deliver robust margin in a challenging environment

With the typically smaller refineries divested/to be closed/divested almost entirely within the third and fourth quartiles of the European market

Retained/Augmented

Divested/closed

Other

Source: Wood Mackenzie; Deutsche Bank

Figure 22: 2015 improvements were not solely about GRMs: Strip out the

estimated benefit and results show underlying material improvement

0 500 1000 1500 2000 2500 3000 3500 4000

BP

Shell

Total

ENI

Repsol

OMV

Reported change (NI $M) GRM implied change (NI $M)

The super-majors in particular look to have delivered greater R&M upside than implied by the 2015 move in GRMs


Figure 23: European majors: Refining capacity by region

and in total. Outside the majors, the sector remains very

Eurocentric

Figure 24: European majors: With E&P earnings heavily

depressed, sensitivity of 2016E net income to $1/bbl

refining moves is material kb/d USA

PADD 2 PADD 3 PADD 5 Europe Asia RoW Total

Shell 685 279 985 740 311 3000

BP 508 234 847 238 1827

Total 169 0 1446 211 64 1890

ENI 636 636

Statoil 230 230

BG

Repsol 890 890

OMV 440 440

GALP 310 310

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Shell BP Total ENI Statoil BG Repsol OMV GALP

% Group NIUS Europe Asia/other



European super-majors: The

European cost curve shows

the extent to which the

majors have focused on

better-positioned refineries

2015 improvements were not

solely about GRM’s: Strip out

the estimated benefit and

results show underlying

material improvement

9 December 2015

Oil Services

Tupras


Strong year-to-date share performance has moderated recently, offering an attractive entry point

Tupras has been one of the strongest performing stocks on the BIST-100 ytd.

The shares have outperformed the BIST-100 and BIST-Industrials by 56% and

40% between the beginning of the year and late October. Key drivers of the

performance were: 1) strong 2Q15 and 3Q15 financials, beating estimates due

to the RUP kick-off in 2Q and strong regional margins; 2) upward revisions of

2015 guidance; 3) strength in regional refining margins due to the abundance

of crude oil supply and decent end-product demand; 4) benefits of a weaker

TRY vs. hard currencies through operating leverage; and 5) being perceived as

a defensive name as it is less sensitive to Turkey-specific risks.

Figure 25: Tupras’ performance vs. XU100 & XUSIN Figure 26: Crack spread vs. Tupras’ share price

20

40

60

80

40,000

60,000

80,000

100,000

07/13 07/14 07/15XUSIN XU100 TUPRS

0

5

10

15

20

25

30

0

5

10

15

20

25

30

01/14 07/14 01/15 07/15 01/16CRKS321B Index Tupras Share Price (USD)



However, the shares have underperformed the BIST-100 and BIST-Industrials

by 5% and regional peers (PKN and MOL etc.) by 12%, mainly due to the

higher risk premia attached to Turkish equities, volatility in crude oil prices and

a decline in margin into 4Q15. Accordingly, the shares are trading at a minor

discount on a P/E basis and a premium of 20% on an EV/EBITDA basis, which

rose as high as 40% over the preceding months. Accordingly, on the basis of a

more constructive refining outlook into 2016 coupled with superior FCF and

dividend yield, we view the recent weakness as an attractive entry point.

Figure 27: Tupras cons. FY16E P/E vs. peers Figure 28: Tupras cons. FY16E EV/EBITDA vs. peers

-40%

-30%

-20%

-10%

0%

10%

20%

30%

0

2

4

6

8

10

12

14

Jan-14 Jul-14 Jan-15 Jul-15

Premium vs. peers (RHS) TUPRAS Peers

-40%

-20%

0%

20%

40%

0

2

4

6

8

10


Premium vs. peers (RHS) TUPRAS Peers Source: Deutsche Bank, Bloomberg Finance LP

Source: Deutsche Bank, Bloomberg Finance LP

9 December 2015

Oil Services

Tupras


13% FCF yield should support L/T dividend yield of 9%

Following the completion of the RUP as of 2Q15, through a capex of

USD3.0bn, we anticipate a USD550m p.a. (unchanged) incremental EBITDA

contribution from RUP, under the assumption of a USD315/tonne diesel-fuel oil

sustainable spread. While a lower crude oil price could pose a downside to the

spread, the rise in the cumulative CUR of Tupras’ refineries is a balancing

factor, in our view. We expect the higher CUR, coupled with the better

optimization of its refineries, to be the new operating plateau going forward.

With Tupras having reached peak capex over the RUP investment cycle, we

expect a gradual reduction in the company’s net debt, as a result of strong FCF

(c.13% yield on average between FY16 and FY20), the pace of which is

moderated under the assumption of sizable dividends (a c.9% dividend yield on

average between FY16E and FY20E).

Figure 29: Tupras’ EBITDA (USD) and CUR progression Figure 30: Tupras’ net debt to EBITDA progression

69%

77%

80%

82%

79%

75%

97%

98%

99%

0%

20%

40%

60%

80%

100%

120%

0

200

400

600

800

1,000

1,200

1,400

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

Tupras CUR, % (RHS) EBITDA (USDm)

-0.1-0.8-0.8-0.5

0.4

-0.2

0.2

-0.9

-2.1

0.50.8

2.8

4.9

2.52.01.8

-100%

-50%

0%

50%

100%

150%

-4

-2

0

2

4

6

2002 2004 2006 2008 2010 2012 2014 2016ENet Debt/EBITDA (RHS) Gearing (%)



All in all, we expect Tupras to attain a FCF yield of 13% and a dividend yield of

9% between FY16 and FY20, as the company’s ability to distribute substantial

dividends should be restored following the hefty investment cycle. Debt

reduction is likely to have a slow gliding trajectory, leading to a net debt to

EBITDA of 1.8x in 2017E vs. 2.5x in 2015E (vs. the 4.9x as of 2014).

Figure 31: Tupras’ FCF & FCF yield progression (%) Figure 32: Tupras’ DPS progression and yield, %

4%

14%

10%

-13%

13% 13% 13%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-1,200

-800

-400

0

400

800

1,200

2012/1

2

2013/1

2

2014/1

2

2015/1

2

2016/1

2

2017/1

2

2018/1

2

FCF (USDm) FCF Yield, % (RHS)

7%6%

12%

11%

8%9%

16%

11%

7%7%8%9%

3%

0%

6%

11%

0%

4%

8%

12%

16%

0

1

2

3

4

5

2002 2004 2006 2008 2010 2012 2014 2016E

TRY

DPS (TRY/share) Dividend Yield, %



9 December 2015

Oil Services

Tupras


Diesel deficit domestic market

The construction of the 10m tonne/p.a. crude oil refining capacity STAR

Rafineri A.S with a Nelson Complexity of 7.39 is progressing on Petkim’s land

plot in Izmir, with an estimated cumulative capex of USD5.7bn to be incurred,

and expected to go online in late 2018.

Figure 33: Turkey’s liquid fuel import/export balance (net) Figure 34: Tupras’ production output breakdown (2Q15)

-3.1

2.5

-12.7

1.8

-14

-12

-10

-8

-6

-4

-2

0

2

4

LPG Gasoline Diesel Fuel Oil

2010 2011 2012 2013 2014

LPG4%

NAPTHA2%

GASOLINES18%

JET FUEL18%

DIESEL31%

FUEL OIL18%

ASPHALTS8%



The refinery’s core output will be diesel, with a production plan of ULSD (6m

tonnes), naphtha (1.6m tonnes), jet fuel (0.5m tonnes) and LPG (0.4m tonnes).

We believe that the domestic diesel and jet fuel market is sufficient to

accommodate higher diesel output of Tupras (2.9m tonnes) and STAR (6.0m

tonnes). Thus, we are not expecting significant pressure in the domestic

pricing environment. We believe that a product deficit in the diesel market and

associated growth continue being accommodative for Tupras and SOCAR to

operate in the domestic market without significant pressure on their margins.

Higher exposure to crudes in proximity is an upside risk

A renewed higher supply of Iranian and/or a rise in exposure to Iraqi crude over

the less-profitable crudes is an upside risk to our estimates, given the

favourable positioning of Tupras’ refiners. The share of Iraqi crude processed

by Tupras, 28% of crude slate, has surpassed that of 27% of Iranian crude

(light and heavy) proceeds, which is likely to persist into 2016 as well. In the

case of a disruption in the crude imports from Russia, we believe that Tupras

should be able to procure alternatives with relative ease given the abundance

of competing crudes on the market.

Figure 35: Tupras’ crude slate progression (‘000 tonnes) Figure 36: Tupras’ crude slate breakdown (as of 2014)

0

10,000

20,000

30,000

2002 2004 2006 2008 2010 2012 2014

Libya Saudi Arabia IranIraq Syria AlgeriaRussia Turkey KazakhstanOthers (Italy, etc.)

Libya0%

Saudi Arabia

9%

Iran27%

Iraq28%

Syria0%Algeria

0%

Russia3%

Turkey12%

Kazakhstan8%

Others (Italy, etc.)

13%

Source: Deutsche Bank. Company data, Energy Market Regulatory Authority

Source: Deutsche Bank. Company data, Energy Market Regulatory Authority

Potential increase in crude

exposure from Iraq is an

upside risk

9 December 2015

Oil Services

Tupras


Valuation: upgrading to Buy

We raise our 12M total return target, driven fully by a DCF valuation, by 5% to

TRY85.0/share for Tupras (target price: TRY80.9/share; DPS: TRY4.1), implying

a 12M total return potential of 22% (vs. the ten-year benchmark bond return of

10.6% and our coverage universe’s 12M upside potential of 18%). Accordingly,

we upgrade our rating to Buy from Hold. The key revisions were: 1) slightly

higher refining margin estimates on a better demand environment and lower

feedstock costs; 2) new macro forecasts and 3) higher CUR after RUP given

the strong execution in 2Q & 3Q.

Figure 37: Tupras’ DCF (USDm)

(USDm) 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Sa les 13,657 14,295 15,709 17,202 17,118 17,141 16,765 16,813 16,811

Sales growth, % -25% 5% 10% 10% 0% 0% -2% 0% 0%

EBITDA 1,196 1,212 1,206 1,208 1,202 1,203 1,177 1,181 1,180

EBITDA margin, % 8.8% 8.5% 7.7% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

Taxes -144 -145 -144 -143 -142 -141 -138 -138 -138

Change in working capital -1,574 -26 -38 -44 -19 -22 -12 -22 -21

Capex -290 -220 -224 -229 -233 -238 -243 -248 -255

Free cash f low -812 820 800 792 807 802 785 772 766

FCF Yield, % -13.4% 13.6% 13.2% 13.1% 13.3% 13.3% 13.0% 12.8% 12.7%

Risk-free rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Beta 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97

Equity risk premium 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Cost of equity 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% 10.8% 10.8%

Cost of debt 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%

Debt/equity 41.4% 41.6% 37.8% 34.1% 31.4% 28.4% 25.7% 22.7% 19.6%

WACC 8.7% 8.7% 8.9% 9.0% 9.2% 9.3% 9.5% 9.7% 9.8%

Discount factor 1.00 1.09 1.19 1.30 1.42 1.55 1.70 1.87

PV of Free cash f low 820 734 667 623 566 506 454 410

EV 2016-2023 4,780

EV terminal at 0.0% growth 4,177

EV tota l 8,958

+ Participations 619

- Net debt 2,799

Ta rget mcap (USDm) 7,365

Current mcap (USDm) 6,049

Current share price (TRY) 69.80

Target share price (TRY) (inc. divs.) 85.00

Ups ide, % 21.8%

2016E DPS (TRY) 4.10

Ta rget sha re pr ice (TRY) (exc . divs .) 80.90 Source: Company data, Deutsche Bank estimates

We value Tupras solely through a USD-based DCF analysis. In our DCF

analysis, we use a 6.0% USD risk-free rate, 5.0% equity-risk premium, 6.5%

cost of debt, 10.8% cost of equity and a 0% terminal growth rate. We use a 0%

terminal growth rate for Tupras due to the company's capacity constraints,

though we estimate that demand for refined oil products will increase by

around 2% over the long term.

9 December 2015

Oil Services

Tupras


Tupras’ extended premium vs. peers on FY15E and FY16E metrics, due to the

strong delivery of RUP, a weaker TRY and exposure to normalization in Iran

has declined visibly since August, also mainly due to higher top-down risk

aversion toward Turkish equities, partial profit taking at Tupras and a better

outlook for CEE refiners.

Figure 38: Tupras’ cons. FY15E EV/EBITDA vs. peers Figure 39: Tupras’ cons. FY16E EV/EBITDA vs. peers

-40%

-20%

0%

20%

40%

60%

80%

0

2

4

6

8

10

12

Jan-14 Jul-14 Jan-15 Jul-15Premium vs. peers (RHS) TUPRAS Peers

-40%

-20%

0%

20%

40%

0

2

4

6

8

10




We believe Tupras should trade at a premium vs. peers due to: 1) higher FCF

and stronger dividend yield outlook; 2) higher refining complexity post RUP;

and 3) more favourable regional positioning.

Figure 40: Tupras’ consensus FY15E P/E vs. peers Figure 41: Tupras’ consensus FY16E P/E vs. peers

-40%

-20%

0%

20%

40%

60%

80%

0

4

8

12

16

Jan-14 Jul-14 Jan-15 Jul-15Premium vs. peers (RHS) TUPRAS Peers

-40%

-30%

-20%

-10%

0%

10%

20%

30%

0

2

4

6

8

10

12

14




Risks

The key downside risks are: 1) faster-than-expected decline in the Med Basin

refining margins; 2) supply shock-related rise in crude oil prices; 3) a potential

toughening competitive landscape if more than one refinery is built in Turkey

and/or refinery upgrades in Russia are completed ahead of expectations; and 4)

regulatory risks. The key upside accretion opportunities to our valuation would

come from: 1) better-than-expected demand buoying product prices and

margins; 2) faster-than-expected normalization of the Iranian crude supply; 3)

higher-than-expected DPS, and 4) higher exposure to the crude stream from

Iraq.

9 December 2015

Oil Services

Tupras


Peer comparison

Tupras is trading at a discount vs. peers on a P/E basis, while at a premium on

EV/EBITDA. The company fares better than most peers on EV/FCF & dividend

yield metrics; thanks to higher FY16E-FY17E FCF yield and payout rate.

Figure 42: Tupras` peer comparison vs. regional and global refiners

Company / Region Rec . 2014 2015E 2016E 2017E 2014 2015E 2016E 2017E 2014 2015E 2016E 2017E 2014 2015E 2016E 2017E

EMEA 14.8 8.0 11.3 13.6 5.1 4.3 4.1 4.3 4.0 4.2 3.3 2.6 -24.9 22.1 14.5 24.5

PKN Orlen Buy 14.0 6.5 6.3 7.1 n.m. 5.1 4.4 4.3 3.9 2.7 2.8 3.0 -71.1 50.6 9.9 8.9

MOL Hold 15.5 6.3 10.6 13.6 5.3 3.5 3.9 4.0 3.9 3.8 2.7 2.1 -53.1 19.1 19.2 24.5

PGNiG Sell 10.1 10.6 13.6 15.2 5.0 5.1 5.6 5.8 4.1 4.7 3.7 2.6 9.9 25.1 21.9 34.0

Hellenic Petroleum Buy 163.5 9.5 12.0 n.m. n.m. 3.4 3.2 n.m. 4.7 5.3 6.7 n.m. 3.4 -53.0 5.7 n.m.

As ia 7.8 12.0 11.0 10.8 10.6 7.7 7.5 6.7 1.9 2.6 2.7 2.8 12.5 6.3 30.0 19.0

Reliance Industries Buy 11.9 13.0 11.1 10.4 10.6 12.4 11.3 9.8 1.1 1.1 1.1 1.2 -22.2 -16.2 -11.6 77.7

IOC Buy 7.8 16.6 10.1 9.0 8.6 13.8 7.6 6.7 3.8 2.0 3.0 3.5 52.6 4.3 36.1 52.9

SK Innovation Buy n.m. 10.3 14.4 11.4 27.4 5.5 6.3 5.8 0.0 2.2 2.2 2.3 -112.6 10.5 21.9 23.1

BPCL Buy 6.3 9.6 10.9 9.4 5.9 7.0 8.2 6.7 5.0 3.5 2.7 3.0 21.5 6.9 68.7 38.5

S-Oil Corp Buy n.m. 11.5 10.8 9.9 182.7 7.1 7.5 7.0 0.3 2.6 2.9 3.2 444.2 5.7 285.2 -73.2

Essar Oil Ltd Sell 66.8 20.3 14.7 14.8 6.1 11.8 7.7 7.4 0.0 0.0 0.0 0.5 3.4 8.8 18.6 14.8

GS Holdings Corp Hold n.m. 12.4 14.5 14.3 39.1 3.0 3.0 2.9 2.6 2.5 2.6 2.7 -6.4 -25.1 37.2 -74.4

HPCL Buy 7.5 11.1 10.7 8.6 9.1 9.7 6.6 5.7 6.5 5.0 3.2 4.2 85.6 3.5 31.9 -26.0

Thai Oil Pcl Buy n.m. 13.5 11.0 12.1 99.9 7.0 6.4 6.5 4.1 3.3 4.1 3.7 23.7 27.9 10.9 11.0

IRPC PCL Hold n.m. 11.1 10.9 11.2 n.m. 8.3 7.6 8.7 0.0 2.7 2.7 2.7 -7.4 15.2 28.1 28.9

US/Canada 11.9 8.4 10.0 10.7 5.9 5.3 5.0 3.7 2.1 2.5 2.7 2.3 26.3 22.1 14.5 7.9

Phillips 66 Hold 13.1 10.6 n.m. n.m. 6.2 5.5 n.m. n.m. 2.2 2.5 n.m. n.m. 42.8 49.5 n.m. n.m.

Valero Energy Buy 10.8 7.9 n.m. n.m. 5.5 4.8 n.m. n.m. 1.5 2.4 n.m. n.m. 24.8 10.9 n.m. n.m.

Marathon Buy 9.9 7.9 10.0 n.m. 5.6 4.5 5.0 n.m. 2.1 2.6 2.7 n.m. 17.6 17.8 17.2 n.m.

Tesoro Corporation Buy 15.7 7.7 n.m. n.m. 9.6 5.4 n.m. n.m. 1.0 1.7 n.m. n.m. 29.5 26.3 n.m. n.m.

HollyFrontier Buy 18.2 8.9 9.3 n.m. 11.0 5.5 6.1 n.m. 7.1 2.8 3.2 n.m. 21.0 17.2 14.5 n.m.

Delek US Hold 6.4 12.1 10.5 10.7 3.5 5.3 3.7 3.7 3.8 2.3 2.3 2.3 27.8 44.9 6.1 7.9

PBF Energy Hold 8.4 9.1 8.3 11.2 7.8 3.0 3.0 2.7 3.1 3.1 3.1 3.1 14.1 -14.0 6.9 10.2

Globa l 24.1 10.8 11.1 11.3 24.9 6.5 5.9 5.8 2.9 2.8 2.9 2.7 26.1 11.2 34.9 10.6

Tupras Buy 8.1 9.1 8.0 7.2 19.9 7.9 6.6 6.4 6.8 0.0 5.9 10.7 13.5 n.m. 10.0 10.3

vs. EMEA -45% 14% -29% -47% 287% 84% 60% 48% 69% -100% 80% 307% -154% n.m. -31% -58%

vs. Asia 4% -24% -27% -33% 87% 3% -12% -4% 257% -100% 114% 276% 8% n.m. -67% -46%

Vs. US -32% 8% -20% -33% 238% 49% 32% 73% 216% -100% 114% 367% -49% n.m. -31% 30%

vs . Globa l -66% -16% -28% -36% -20% 21% 11% 9% 134% -100% 104% 300% -48% n.m. -71% -3%

P/E EV/EBITDA Dividend y ield (%) EV/Free Cash Flow (x)


Figure 43: Average FY16E-FY17E FCF yield vs. FY16E P/E

EMEA

PKN Orlen

MOL

PGNiG

Asia

Reliance Industries

IOC

BPCL

S-Oil Corp

Essar Oil Ltd

GS Holdings Corp

HPCL

Thai Oil Pcl

IRPC PCL

US/Canada

HollyFrontier

Delek US

Global

Tupras

0

4

8

12

16

6 8 10 12 14 16

FY

16E

-F

Y17E

FC

F Y

ield

, %

FY16E P/E Source: Deutsche Bank, Bloomberg Finance LP

Tupras fares favorably vs.

most peers on an average

FY16E-FY17E FCF yield vs.

FY16E P/E comparison

9 December 2015

Oil Services

Tupras


Earnings outlook: raising estimates and target price

We increase our FY16E EBITDA for Tupras by 17% to TRY3.7bn (4% higher

than cons.) and FY17E EBITDA by 22% to TRY3.8bn (9% higher than cons.)

under the assumption of a slightly better refining margin environment coupled

with an improvement in Tupras’ CUR post RUP investment.

Figure 44: Revisions to our forecasts

2015E 2016E 2017E

Old New ∆, % Old New ∆, % Old New ∆, %

Revenues 36,419 37,169 2% 41,638 44,200 6% 48,466 49,582 2%

EBITDA 2,859 3,256 14% 3,196 3,748 17% 3,115 3,807 22%

Net income 1,707 1,916 12% 1,871 2,197 17% 1,759 2,436 38%

EBITDA M. % 7.8% 8.8% 0.9 pps 7.7% 8.5% 0.8 pps n.m. 7.7% n.m.

Source: Company data, Deutsche Bank estimates, Bloomberg Finance LP

Figure 45: Deutsche Bank estimates vs. consensus estimates

2015E 2016E 2017E

DB Cons. Diff, % DB Cons. Diff, % DB Cons. Diff, %

Revenues 37,169 37,134 0% 44,200 42,632 4% 49,582 49,059 1%

EBITDA 3,256 3,250 0% 3,748 3,609 4% 3,807 3,501 9%

Net income 1,916 2,052 -7% 2,197 2,232 -2% 2,436 2,147 13%

EBITDA M. % 8.8% 8.8% 0 pps 8.5% 8.5% 0 pps 7.7% 7.1% -0.5 pps

Source: Company data, Deutsche Bank estimates, Bloomberg Finance LP

Figure 46: Tupras FY15E consensus EBITDA progression Figure 47: Tupras FY16E consensus EBITDA progression

35

45

55

65

75

2,000

2,300

2,600

2,900

3,200

3,500


2015 EBITDA Estimate Share Price

TRYm TRY/s

35

45

55

65

75

2,000

2,500

3,000

3,500

4,000

Jan-14 Jul-14 Jan-15 Jul-15 Jan-162016 EBITDA Estimate Share Price

TRYm TRY/s



Figure 48: Tupras FY15E cons. net income progression Figure 49: Tupras FY16E cons. net income progression

30

40

50

60

70

80

1,000

1,250

1,500

1,750

2,000

2,250


2015 Net Income Estimate Share Price

TRYm TRY/s

30

40

50

60

70

80

1,000

1,250

1,500

1,750

2,000

2,250


2016 Net Income Estimate Share Price

TRYm TRY/s



9 December 2015

Oil Services

Tupras


3Q15 earnings review and 4Q15 preview

Strong results on robust CUR post RUP on a favourable operating backdrop

Tupras’ 3Q15 net income rose to TR750m (up 99% YoY, up 6% QoQ, our est.:

TRY721m, RT consensus: TRY652m), with EBITDA of TRY1,119m (up 129%,

YoY, up 4% QoQ, our est.: TRY1,122m, cons.: TRY1,140m) and revenues at

TRY10,446m (down 12% YoY, down 1% QoQ; our est.: TRY11,082m, cons.:

TRY10,347m). 3Q EBITDA is broadly in line with expectations, with the YoY

growth supported by: 1) high CUR (102% in 9M15 vs. 72.6% in 9M14 and

102% in 2Q15) and production from the RUP, 2) favourable regional margins,

3) robust product demand and weak crude oil prices supporting price ratios

and 4) weaker TRY/USD. A higher-than-expected deferred tax income of

TRY259m in 3Q15 (vs. TRY576m in 9M15) led to the positive deviation at the

bottom line.

3Q net ref. margin up to USD8.3/bbl from USD7.5/bbl in 2Q

Tupras’ 3Q15 net refining margin improved to USD8.3/bbl (vs. USD7.5/bbl in

2Q15, USD5.5/bbl in 3Q14). Strong product price ratios, regional strength in

margins driven by robust demand partially due to seasonality, weak TRY vs.

USD and higher CUR post RUP lowering unit costs accounted for the margin

expansion, which is as expected. 3Q15 Med Ural refining margin (complex)

registered USD4.9/bbl (vs. USD4.9/bbl in 2Q15, USD3.4/bbl in 3Q14).

Accordingly, 3Q EBITDA of TRY1,119m is broadly in line with expectations.

Tupras’ CUR stood at 110% in 3Q15 (vs. 102% in 2Q15) due to post-RUP

(partially online in 2Q, fully operational in 3Q) optimizations and higher output

alongside the seasonally-robust demand in the domestic and regional markets.

Higher-than-expected deferred tax income leads to EPS beat

Higher-than-expected net deferred tax income of TRY259m led to the beat at

the bottom line as net income reached TRY750m in 3Q (up 99% YoY, up 6%

QoQ). Net debt rose to TRY8.4bn as of 3Q15 (vs. TRY6.9bn in 2Q15), mainly

due to the weaker TRY inflating the reporting of mostly FX-denominated debt

and a rise in NWC led by higher receivables in the quarter.

FY15E net ref. margin guidance increases to USD6.0/bbl-USD6.7/bbl

Tupras has increased its FY15E net refining margin guidance range to

USD6.0/bbl-USD6.7/bbl from USD5.0/bbl-USD5.6/bbl (vs. USD3.2/bbl in FY14,

DBe: USD6.0/bbl). Med complex margin expectation has been kept at

USD4.3/bbl-USD4.7/bbl. It has also maintained its FY15 CUR guidance of 97%

(vs. 79% in FY14) and production of 27.5m tonnes.

Subdued inventory losses should lead to substantial YoY EBITDA rise in 4Q15

We expect Tupras to post respective 4Q15 revenues/EBITDA/net income of

TRY9.1bn/TRY661m/TRY181m on our preliminary estimates. Accordingly, we

anticipate a significant rise at the EBITDA level (TRY661m in 4Q15 vs. TRY53m

in 4Q14). The decline in crude oil prices in 4Q15 has been more limited with

Brent crude down 11% qtd (down USD5.2 qtd) in 4Q15 while a 40% (USD38

qtd) quarterly drop had been observed back in 4Q14.

Figure 50:Tupras: 3Q15 results vs. estimates

3Q15 3Q14 YoY % 2Q15 QoQ % DBe Cons.* Revenues 10,446 11,812 -12% 10,601 -1% 11,082 10,347 EBITDA 1,119 488 129% 1075 4% 1,122 1,140 EBITDA M. (%) 10.7% 4.1% 6.6 pps 10.1% 0.6 pps 10.1% 11.0% Net income 750 377 99% 710 6% 721 652

Source: Company data, Deutsche Bank estimates, * Research Turkey consensus estimates

9 December 2015

Oil Services

Tupras


Investment thesis

Outlook

As Turkey's only refiner, Tupras has enjoyed high refining margins, particularly

following its privatization, as a result of the completion of a series of key

investments including the Residuum Upgrade Project (RUP), strong market

position and vertical integration in Turkey and access to diverse crude oil

sources; including close proximity to Iran and Iraq and strong management.

We believe Tupras is one of the better positioned refiners in the Med Basin,

with a higher FCF and dividend yield profile outlook following the completion

of the RUP. Following the share’s recent underperformance, the current

valuation does not appear to be fully pricing in the EBITDA growth potential

(c.USD550m in 2016E) related to the RUP, which became operational as of

2Q15, and significant improvement in FCF and dividend yields. Accordingly,

we rate the shares as Buy.

Valuation

We value Tupras solely through a USD-based DCF analysis. In our DCF

analysis, we use a 6.0% risk-free rate, 5.0% equity-risk premium, 6.5% cost of

debt, 10.9% cost of equity and a 0% terminal growth rate. We use a 0%

terminal growth rate for Tupras due to the company's capacity constraints,

though we estimate demand for refined oil products to increase by around 2%

over the long term.

Risks

The key downside risks are: 1) a faster-than-expected decline in Med Basin

refining margins; 2) a supply shock-related rise in crude oil prices; 3) potential

toughening of the competitive landscape if more than one refinery is built in

Turkey, and/or if refinery upgrades in Russia are completed ahead of

expectations; and 4) regulatory risks.

9 December 2015

Oil Services

Tupras


CE3 refining outlook

Low crude prices benefit regional refiners

CE3 oils are partly upstream players, especially PGNiG and MOL. However, the

decline in crude oil prices that commenced in mid-2014 mostly had a positive

impact on the earnings of the companies’ downstream divisions. Low prices of

refined products incentivized consumption and a demand recovery allowed

products’ crack spreads to improve. The cost of internally consumed oil

declined, which has also been margin-enhancing. In gas trading, the cost of

oil-linked gas supply contracts declined, restoring (at least temporarily)

profitability in the gas trading businesses. We believe that all of these factors

should prevail as long as crude prices remain at low levels.

Figure 51: Brent (USD/bbl) vs. CE3 stocks performance (local currency)

40

70

100

130

160

190

220

40

70

100

130

160

190

220

Jan

-14

Ap

r-1

4

Jul-

14

Oct-

14

Jan

-15

Ap

r-1

5

Jul-

15

Oct-

15

USD/bbl

PKN (lhs) MOL (lhs) PGNiG (lhs) Brent oil (rhs)

Rebased to 100


Negative fundamentals for oil prices in near term

Concerns have risen that oil prices are likely to remain low for longer (the IEA

recently called for oil supply to remain above demand through 2020). We

believe a sustained rebound in oil prices is unlikely in the near term, given the

negative fundamentals. The oil market remains in substantial oversupply and

we expect OECD inventories to rise from already high levels through H1-2016.

A declining rig count in the US is likely needed to support prices until US

production falls more convincingly.

However, we see supply/demand rebalancing toward end-2016, which we

believe should allow for a more sustainable, albeit very gradual, rise in oil

prices. We forecast Brent at USD 59/bbl as of end-2016 with an average of

USD 63/bbl in 2017 and USD 70/bbl in 2018E.

Figure 52: Deutsche Bank crude oil price forecasts (USD/bbl)

2014 1Q 15 2Q 15 3Q 15 4Q 15E 2015E 1Q 16E 2Q 16E 3Q 16E 4Q 16E 2016E 2017E 2018E

WTI 93.1 48.6 58.0 46.6 48.0 50.3 50.0 50.0 54.0 54.0 52.0 58.0 65.0

Brent 99.5 55.1 63.5 51.7 53.0 55.8 55.8 55.0 59.0 59.0 57.0 63.0 70.0 Source: Deutsche Bank estimates

This section of the report is an

excerpt from the “CE3 Oil &

Gas: Positive on CEE

downstream, Buy PKN, Sell

PGNiG” report published by

Tomasz Krukowski, CFA on

24 November 2015.

9 December 2015

Oil Services

Tupras


Downstream: some moderation after a very strong 2015

Until 2015, the economics of refining activity in Europe (including central

Europe) was predominantly very poor. Supply disadvantages vs. US and

Middle East producers, high internal consumption of oil and demand

contraction in local markets all led to low utilization rates, very low profitability

and very low returns on employed capital. Much-needed capacity

rationalization has been progressing very slowly. Against our initial

expectations, 2015 turned out to be a very good year for European refining,

which witnessed a significant rebound in margins. While the scale of recovery

in crack spreads was exaggerated by an increased number of refinery outages,

especially in the 2Q/3Q peak demand period, we also point to potentially

longer-lasting developments (e.g. a reduced cost disadvantage vs. US players

on a lower WTI-Brent spread and the lower cost of internally consumed oil).

Heading into 2016, we believe the outlook for CEE refiners is still encouraging,

although the industry macro should moderate somewhat after a very strong

2015. We expect the demand recovery visible in CEE to continue, driven by

ongoing macro improvement, leading to higher utilization rates. The

disadvantages of European refiners vs. their US counterparts should remain

lower: we expect both WTI-Brent spread and crude oil to stay at low levels.

The risk of an influx of distillates from Middle Eastern refiners appears to be

diminishing, as additional capacity in this region should come on-stream only

in 2018-19. Increased competition between crude oil producers for CEE

refiners (the first deliveries of Saudi oil to Poland took place in 3Q 2015) is

likely to widen the Urals-Brent differential vs. the 2015 average.

Crack spreads recovered in 2015 amid demand recovery and increased

outages

Gasoline and diesel crack spreads improved considerably in 2015-to-date vs.

the levels witnessed in previous years. NWE Brent 2:1:1 crack spread

increased by USD 3.6/bbl (33%) in January-November 2015 vs. the average for

2011-15. The improvement was partially driven by supply disruptions. Refiners’

outages in NWE, CEE and Mediterranean regions were especially numerous at

the beginning of the driving season, although they have eased to average

levels since August.

Figure 54: NWE Brent 2:1:1 crack spread in 2015 vs.

2011-14 trading range

Figure 55: Refineries' outages in NWE, CEE and

Mediterranean in 2015 vs. 2011-14 range

6

8

10

12

14

16

18

20

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

2015 2014 2013 2012

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Jan

Feb

Mar

Ap

r

May

Ju

n

Ju

l

Au

g

Sep

t

Oct

No

v

Dec

kbpd

2015 2014 2013 2012


Source: Deutsche Bank, Reuters

Figure 53: Refining: Utilization rates

in OECD Europe

65%

70%

75%

80%

85%

90%

Ju

n-1

2

Sep

-12

Dec-1

2

Mar-

13

Ju

n-1

3

Sep

-13

Dec-1

3

Mar-

14

Ju

n-1

4

Sep

-14

Dec-1

4

Mar-

15

Ju

n-1

5

Source: Deutsche Bank, IEA

9 December 2015

Oil Services

Tupras


Supply disruptions have been coupled with a demand recovery in 2015.

Demand for key refined products (especially diesel but also gasoline) have

showed signs of a recovery since late 2014, and positive trends have been

reinforced throughout 2015. We believe the increased affordability of refined

products (a function of crude prices) and improving macro conditions across

Europe have supported demand for motor fuels.

Figure 56: Diesel volume growth (12-month rolling

average, YoY)

Figure 57: Gasoline volume growth (12-month rolling

average, YoY)

-15%

-10%

-5%

0%

5%

10%

Jan

-12

Ju

n-1

2

No

v-1

2

Ap

r-1

3

Sep

-13

Feb

-14

Ju

l-1

4

Dec-1

4

May-1

5

HU, HR & CZ PL Eurozone

YoY

-10%

-5%

0%

5%

Jan

-12

Ju

l-1

2

Jan

-13

Ju

l-1

3

Jan

-14

Ju

l-1

4

Jan

-15

Ju

l-1

5

HU, HR & CZ PL Eurozone

YoY

Source: Deutsche Bank, Eurostat

Source: Deutsche Bank, Eurostat

Margin capture improved

The profitability of CEE refiners in 9M 2015 improved more than the rise in

motor fuel crack spreads suggests. We estimate overall downstream margin

capture (including refining and petchem, excluding retail) should improve in

2015E by 3.1 and 4.1 USD/bbl for PKN and MOL respectively (based on clean

EBITDA figures, adjusted for the inventory effect and other one-offs).

Figure 58: Capacity utilization rates improved throughout

2015 (PKN and MOL)…

Figure 59: …which also contributed to an increase in

downstream EBITDA margin capture (USD/bbl, ex-retail)

75%

80%

85%

90%

95%

100%

105%

110%

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

PKN Orlen MOL

0

2

4

6

8

10

12

PKN MOL

2014 2015E

USD/bbl



Improved competitiveness of European refining vs. US

A portion of the improved margin capture that CEE refiners witnessed in 2015-

to-date stemmed from the increased profitability of petchem (a very tight

market), which might end in 2016. However, we also point to the improved

competitiveness of European vs. US refiners, driven by two factors:

9 December 2015

Oil Services

Tupras


Narrowing WTI-Brent spread: The crude surpluses in place in the US

domestic market previously gave US refiners a significant cost

advantage over European players. The WTI-Brent differential averaged

10.6 USD/bbl in 2013, but only 6.6 USD/bbl in 2014 and 5.0 USD/bbl in

2015 to date. The narrowing spread reflects diminishing crude

surpluses in the US in relation to market balances elsewhere.

Lower cost of fuel consumption: most European refiners utilize crude

oil as a fuel in the refining process, while US-based refiners largely rely

on natural gas. In CEE, internal crude consumption accounts for up to

c.8-9% of processed volumes. The relative advantage of US refiners

vs. European players declined in 2015 with the fall in crude oil prices.

US refiners witnessed a significant cost advantage for several years,

manifested in rising exports of fuels. US net exports of diesel and gasoline to

Europe increased from c.80kb/d in 2010 to c.350kb/d in mid-2014. However,

the unwinding visible since then has been very limited.

Figure 60: Declining WTI-Brent differential

Figure 61: US net imports to Europe, 12-month rolling

average

-30

-25

-20

-15

-10

-5

0

5

10

Jan

-05

May-0

6

Sep

-07

Jan

-09

May-1

0

Sep

-11

Jan

-13

May-1

4

Sep

-15

USD/bbl

-400

-300

-200

-100

0

100

200

Jan

-10

Dec-1

0

No

v-1

1

Oct-

12

Sep

-13

Au

g-1

4

Ju

l-1

5

kbpd

Diesel Gasoline Diesel + Gasoline Source: Deutsche Bank, Bloomberg Finance LP

Source: Deutsche Bank, EIA

Ramp-up in Middle East continues but should see a break in 2016-17

The Middle East is another region with a cost advantage vs. Europe and which

invests heavily in refining capacity. The ramp-up of export-oriented capacity

continued in 2015. After the refinery in Jubail reached its full capacity of

400kb/d in mid-2014 (adding 200kb/d to the market balance), the projects in

Yanby (400kb/d) and Ruwais (417kb/d) reached full potential in June and

November 2015 respectively. While distillates from these locations are likely to

be increasingly present in the European markets in 2016, the expansion of

capacity in the Middle East should lose pace in 2016-17. Construction of

refineries in Jazan (400kb/d) and Fujarah (200kb/d) is facing delays, and the

projects are unlikely to be operational before 2018. The commissioning of Al

Zour (615kb/d) appears to be even more remote.

European capacity rationalization delayed

Despite the improvement in profitability that European refiners witnessed in

2015, we believe the sector’s competitiveness on a global basis is still low. In

CEE alone, we note that PKN’s asset in Lithuania (Mazeikiu, capacity of 205

kb/d) and MOL’s assets in Croatia (Sisak, 44kb/d) remain disadvantaged due to

poor logistical set-ups, putting their economic viability in question even in 2015

market conditions. Long-awaited refining capacity rationalization in Europe has

not materialized in 2015 as improved returns postponed decommissioning

9 December 2015

Oil Services

Tupras


decisions. Of the c.750kb/d refining capacity that was vulnerable to closure in

2015, only about one third has been delivered.

Urals-Brent differential

CEE refiners (especially PKN and MOL) major in the processing of heavy oils

and predominantly rely on the supply of Urals blends. Logistical considerations

(pipeline connections) and refineries’ technical specifications favoured Urals.

Surprisingly, however, the first supplies from Saudi to Poland took place in 3Q

2015. While the quantities are still insignificant and CEE refiners still need to

prove the viability of processing Middle Eastern oils (Saudi or Kurdish),

increased competition between oil producers for CEE refiners benefits the

latter. The Urals-Brent differential, which rose to over USD 3.5/bbl in mid-

November, did not appear sustainable to us (it has already contracted to c.USD

2.6/bbl), although we could see some increase vs. the average levels of USD 1-

2/bbl witnessed in the past several years.

Figure 62: Urals-Brent spread

-8

-6

-4

-2

0

Jan

-05

Mar-

06

May-0

7

Ju

l-0

8

Sep

-09

No

v-1

0

Jan

-12

Mar-

13

May-1

4

Ju

l-1

5

USD/bbl

Source: Deutsche Bank, Reuters

9 December 2015

Oil Services

Tupras


Appendix 1

Important Disclosures

Additional information available upon request

Disclosure checklist

Company Ticker Recent price* Disclosure

Tupras TUPRS.IS 69.50 (TRY) 8 Dec 15 14,15 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=TUPRS.IS

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Koray Pamir

http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=TUPRS.IS

9 December 2015

Oil Services

Tupras


Historical recommendations and target price: Tupras (TUPRS.IS) (as of 12/8/2015)

1 2 3

45

6

7 8

9

1011

1213

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15

Secu

rity

Pri

ce

Date

Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9,2002

1. 16/01/2013: Hold, Target Price Change TRY51.00 8. 09/09/2014: Hold, Target Price Change TRY50.30



4. 15/11/2013: Upgrade to Buy, Target Price Change TRY50.45 11. 10/07/2015: Hold, Target Price Change TRY63.70

5. 16/12/2013: Downgrade to Hold, Target Price Change TRY48.60 12. 18/08/2015: Hold, Target Price Change TRY68.50


7. 07/07/2014: Hold, Target Price Change TRY47.53

9 December 2015

Oil Services

Tupras


Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

41 %

53 %

6 %22 % 20 %20 %

0

5

10

15

20

25

30

35

40

45

Buy Hold Sell

Global Universe

Companies Covered Cos. w/ Banking Relationship

Regulatory Disclosures

1.Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2.Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

https://gm.db.com/equities

http://gm.db.com/

9 December 2015

Oil Services

Tupras


Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively

"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources

believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.

Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own

account or with customers, in a manner inconsistent with the views taken in this research report. Others within

Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those

taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis,

equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication

may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or

otherwise. Deutsche Bank and/or its affiliates may also be holding debt securities of the issuers it writes on.

Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment

banking revenues.

Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do

not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no

obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or

estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational

purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any

particular trading strategy. Target prices are inherently imprecise and a product of the analyst’s judgment. The financial

instruments discussed in this report may not be suitable for all investors and investors must make their own informed

investment decisions. Prices and availability of financial instruments are subject to change without notice and

investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is

denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the

investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are

current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and

other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties.

Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise

to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash

flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a

loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the

loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse

macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation

(including changes in assets holding limits for different types of investors), changes in tax policies, currency

convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and

settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed

income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to

FX depreciation, or to specified interest rates – these are common in emerging markets. It is important to note that the

index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended

to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon

rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is

also important to acknowledge that funding in a currency that differs from the currency in which coupons are

denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to

the risks related to rates movements.

Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk.

The appropriateness or otherwise of these products for use by investors is dependent on the investors' own

circumstances including their tax position, their regulatory environment and the nature of their other assets and

liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar

9 December 2015

Oil Services

Tupras


to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can

be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be

incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable

for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized

Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable to access the

website please contact your Deutsche Bank representative for a copy of this important document.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i)

exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by

numerous market factors, including world and national economic, political and regulatory events, events in equity and

debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed

exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are

affected by the currency of an underlying security, effectively assume currency risk.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the

investor's home jurisdiction.

United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and

SIPC. Non-U.S. analysts may not be associated persons of Deutsche Bank Securities Incorporated and therefore may not

be subject to FINRA regulations concerning communications with subject company, public appearances and securities

held by the analysts.

Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated

in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under

German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European

Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority.

United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at Winchester

House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the

Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial

Conduct Authority. Details about the extent of our authorisation and regulation are available on request.

Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch.

Korea: Distributed by Deutsche Securities Korea Co.

South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register

Number in South Africa: 1998/003298/10).

Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles

Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respect of any matters

arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who

is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and

regulations), they accept legal responsibility to such person for its contents.

Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number - Registered as a financial

instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA,

Type II Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks

involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by

multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to

losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional

losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories

of investment advice, products and services. Recommended investment strategies, products and services carry the risk

of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in

market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the

http://www.optionsclearing.com/about/publications/character-risks.jsp

9 December 2015

Oil Services

Tupras


relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in

this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the

name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank

Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are

not disclosed according to the Financial Instruments and Exchange Law of Japan.

Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may

from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank

may engage in transactions in a manner inconsistent with the views discussed herein.

Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre

Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall

within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower,

West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related

financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre

Regulatory Authority.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute,

any appraisal or evaluation activity requiring a license in the Russian Federation.

Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the

Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall

within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya

District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.

United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated

by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services

activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai

International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been

distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as

defined by the Dubai Financial Services Authority.

Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product

referred to in this report and consider the PDS before making any decision about whether to acquire the product. Please

refer to Australian specific research disclosures and related information at

https://australia.db.com/australia/content/research-information.html

Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the

meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.

Additional information relative to securities, other financial products or issuers discussed in this report is available upon

request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche

Bank's prior written consent. Please cite source when quoting.

Copyright © 2015 Deutsche Bank AG

https://australia.db.com/australia/content/research-information.html

David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

International locations

Deutsche Bank AG

Deutsche Bank Place

Level 16

Corner of Hunter & Phillip Streets

Sydney, NSW 2000

Australia

Tel: (61) 2 8258 1234

Deutsche Bank AG

Große Gallusstraße 10-14

60272 Frankfurt am Main

Germany

Tel: (49) 69 910 00

Deutsche Bank AG

Filiale Hongkong

International Commerce Centre,

1 Austin Road West,Kowloon,

Hong Kong

Tel: (852) 2203 8888

Deutsche Securities Inc.

2-11-1 Nagatacho

Sanno Park Tower

Chiyoda-ku, Tokyo 100-6171

Japan

Tel: (81) 3 5156 6770

Deutsche Bank AG London

1 Great Winchester Street

London EC2N 2EQ

United Kingdom

Tel: (44) 20 7545 8000

Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005

United States of America

Tel: (1) 212 250 2500

Documents

Rating Date Company Buy Tupras - Anasayfa - Tüpraş · Rating Date Buy Emerging Europe Turkey Oil & Gas Oil Services Company Tupras 9 December 2015 Recommendation ... Net debt/equity