Last Update 04 Dec 25
Fair value Increased 1.70%PKN: Earnings Multiple Will Rise As Revenue And Margins Slightly Weaken
Analysts have nudged their price target on Orlen higher to approximately $87.31 from about $85.86, citing a modestly richer future earnings multiple that more than offsets slightly weaker revenue growth and profit margin expectations.
What's in the News
- Orlen S.A. has scheduled a Special and Extraordinary Shareholders Meeting for November 13, 2025, at 11:00 Central European Standard Time. Key corporate decisions and potential strategic actions are expected to be discussed (Key Developments).
Valuation Changes
- The Fair Value Estimate has risen slightly, moving from approximately PLN 85.86 to about PLN 87.31 per share. This reflects a modestly higher intrinsic valuation.
- The Discount Rate remains unchanged at 9.24 percent, indicating no revision to the assumed cost of capital in the valuation model.
- Revenue Growth expectations have weakened moderately, with the projected rate moving from around negative 3.33 percent to roughly negative 4.36 percent.
- The Net Profit Margin forecast has edged down slightly, from about 4.71 percent to approximately 4.68 percent, suggesting a marginally less favorable profitability outlook.
- The future P/E multiple has risen moderately, increasing from roughly 11.01x to about 11.92x, implying a somewhat richer earnings valuation for Orlen.
Key Takeaways
- Diversification in funding and strategic bond issuance improve cash flow, supporting revenue growth and higher future earnings.
- Focus on renewable energy and upstream growth enhances potential for improved margins and earnings.
- The challenging macroeconomic environment and regulatory changes could significantly impact Orlen's revenue, margins, and overall earnings across various segments.
Catalysts
About Orlen- Operates in refining, petrochemical, energy, retail, gas, and upstream business.
- Orlen's investment in the diversification of its funding and securing favorable loans (such as the European Investment Bank loan and BGK loan) is aimed at supporting its energy distribution infrastructure, which could lead to future revenue growth.
- The issuance of USD 1.25 billion in bonds and confirmation of strong financial standing by Fitch and Moody's bolster Orlen's cash flow and may support higher future earnings.
- Planned rationalization and phasing of CapEx, with a significant decrease from initially forecasted levels, suggests improved capital efficiency and potential for better net margins.
- Strong performance in the energy segment, notably from renewable energy investments and expected growth in electricity production capacity, could drive future revenue and margin improvements.
- Continued focus on upstream growth, particularly in Norwegian assets, and absence of regulatory burdens like gas write-offs may enhance earnings potential in the coming years.
Orlen Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Orlen's revenue will decrease by 1.6% annually over the next 3 years.
- Analysts assume that profit margins will increase from 0.5% today to 3.7% in 3 years time.
- Analysts expect earnings to reach PLN 10.5 billion (and earnings per share of PLN 9.06) by about May 2028, up from PLN 1.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting PLN12.8 billion in earnings, and the most bearish expecting PLN8.7 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, down from 53.9x today. This future PE is lower than the current PE for the GB Oil and Gas industry at 31.8x.
- Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.87%, as per the Simply Wall St company report.
Orlen Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The challenging macroeconomic environment, including lower refining margins and volatile gas and electricity prices, could negatively impact revenue and net margins.
- Regulatory changes related to gas write-offs and compensation adjustments have reduced financial support by PLN 16 billion compared to the previous year, affecting overall earnings.
- Petrochemical and upstream segments were negatively impacted by the macroeconomic environment and regulatory write-offs, posing risks to revenue generation from these areas.
- Expectations of tighter spreads in gas trading contracts and potential further narrowing of spreads could adversely affect revenue from the gas segment and overall earnings.
- Maintenance shutdowns and weather-related disruptions, such as those affecting Lithuanian refinery throughput, could lead to fluctuations in production volume and bottom-line performance.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of PLN69.967 for Orlen based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PLN85.0, and the most bearish reporting a price target of just PLN58.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN281.4 billion, earnings will come to PLN10.5 billion, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 9.9%.
- Given the current share price of PLN68.23, the analyst price target of PLN69.97 is 2.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.