PKN Orlen and Lotos signed PLN 200m agreement for fuel sales between the two groups, Lotos told the press yesterday. The agreement consist two deals, expire at September 30 and October 31 2006. Lotos named terms as "standard market conditions."
We consider the news as neutral. Due to the size of the country and the distance of the two major refineries such agreements are very common to secure supply of filling station network in those areas where the other refinery has geographical advantage.
We maintain our buy call for both names: our target price on PKN Orlen is PLN 63.2 implying 21% upside. In case of Lotos, we see fair value at PLN 55.9, 20% upside.