Gasoline consumption grew by 6% in Hungary in 1H06 while Diesel sales were up 19%, Hungarian Petroleum Association reports. Total fuel market growth rate was 11%, up from 7% in FY05, practically showing no sensitivity on rising fuel prices.
Our view:
MOL two refineries, such as other key refineries in the region, are already running at near 100% capacity utilization rate. Thus, we believe that MOL should lower exports in order to meet fast rising local demand. Selling on the local market, however, means lower distribution costs, which could be still beneficial for the company. Please also note, that unlike to other CEE oils MOL group has much higher (almost double) Diesel production than gasoline, which makes them well placed on the CEE fuels markets where Diesel consumption is growing much faster than gasoline.
We maintain our Buy recommendation with our target price of HUF 27,233.