Future Eyes, your write-up is not making any business sense.
1) How can a company register lower profit while crack spread (profit margin) is going higher and higher ?
Q4'16, Crack Spread USD14/barrel, Actual : RM207mil / EPS : 69 cts (Production :10.4 mil barrels)
Q1'17, Crack Spread USD16/barrel, Actual : RM279mil / EPS : 93 cts (Production :10.1 mil barrels)
Q2'17, Crack Spread USD18/barrel, **Est : minimum PAT RM300mil / EPS : RM1.00 (100 cents)
Allowance : Profit can touch RM365 mil if without inventory loss.
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Note :-
1) Crack Spread = Selling Price - Cost of Crude Oil per Barrel
2) Every USD2 increase in Crack Spread will boost HengYuan's profit by USD20mil or RM86mil or EPS 28 cts idf production volume is at 10 mil barrels per quarter.
2) Most of the refinery companies achieve better or increase profit in Q2'17, Shell, Reliance, Philip66 and many imdustry peers. This is something being announced by refinery companies and not based on own assumptions.
RIL Q1 results: Net profit up 28% to Rs 9,108 crore
Reliance Industries Ltd on Thursday reported 28 per cent jump in the June quarter net profit to Rs 9,108 crore on back of higher refinery and petrochemical margins.
Reference for Refinery PROFIT :-
http://zeenews.india.com/companies/ril-q1-results-net-profit-up-28-to-rs-9108-crore-2025393.html" style="color: rgb(0, 102, 170); text-decoration-line: none;" target="_blank">http://zeenews.india.com/companies/ril-q1-results-net-profit-up-28-to-rs-9108-crore-2025393.html >
Reference for Peer Share Price Benchmarking (All Time High) :-
https://www.investing.com/equities/reliance-industries" style="color: rgb(0, 102, 170); text-decoration-line: none;" target="_blank">https://www.investing.com/equities/reliance-industries >
(Future Eyes, please provide real case example instead of your own unproven assumptions to sustain your claims )
3) With Low Crude Oil Price, Refinery Industry enjoys Gross Profit Margin of 40%. Huge Jumps In Decade as compare to 10% to 20% in the past
If you based on crude oil price at USD50 per barrel and crack spread (profit margin) at USD20 per barrel, the GROSS PROFIT MARGIN is 40%, which is very lucrative for any manufacturing business. As compares to the time when crude oil is at USD100 perbarrel, the gross profit margin is only 20%.
4) Refinery is the Future ( Game Changer for Oil & Gas Industry)
Due to excess supply of crude oil, the crude price will remain low for next few years which is very good for refinery companies to sustain its profitability in medium term. The exploration & production will experience profit trade off with lower profit in long run while refinery will continue to enjoy sustainable and high profit in longer run.
Future Eyes,
I repeat Heng Yuan will report minimum EPS RM1.00 in Q2'17
http://klse.i3investor.com/blogs/636363/129883.jsp
