Deutsche Bank (ETR:DBKGn) has adjusted its price target on shares of Neste Oyj (NESTE: FH) (OTC: NTOIY), reducing it to €18.00 from €20.00, while retaining a Hold rating on the stock.
The firm anticipates a decline in the renewable comparable sales margin for the third quarter of 2024, influenced by the sustained margin pressure from lower diesel prices.
Despite an expected modest recovery in carbon prices, such as D4 RINs and LCFS, high feedstock prices have persisted.
Neste's Martinez refinery is projected to reach approximately 75% utilization during the quarter, which is likely to dilute renewable margins as well.
Consequently, Deutsche Bank estimates a comparable sales margin in Renewable Products at $323 per ton for the third quarter of 2024, a decrease from $382 per ton in the second quarter of 2024 and significantly lower than the $912 per ton in the third quarter of 2023.
The analysis suggests that depending on the impact of any hedging, the actual figures could be more conservative.
Renewable production is expected to be slightly lower quarter-over-quarter, primarily due to scheduled maintenance in Singapore and Rotterdam.
However, due to prior inventory buildups, sales volumes are forecasted to see a modest increase quarter-over-quarter, reaching 985 kilotons in the third quarter of 2024, compared to 965 kilotons in the second quarter. This includes approximately 114 kilotons of sustainable aviation fuel (SAF), up from 65 kilotons in the previous quarter.
Based on these projections, Deutsche Bank forecasts that Neste's comparable EBITDA for Renewable Products will be €592 million in the third quarter of 2024, marking a 39% decrease from the €152 million reported in the second quarter of the year.
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