Neste: A Solid 1Q22

Neste reported very good 1Q22 results with EBITDA up 35% on a higher bio diesel margin and a increase in oil refining. However, the market sold down the stock despite beating consensus. The only item that could have caused concern was company guidance of a “lower” Biodiesel margin in 2Q22. However, the 1Q22 guidance was lower and they beat it handsomely, perhaps management is simply being conservative?

In the 4Q21 conference they guided 1Q22 for US$650/725 ton and delivered US$806. Now they guide 2Q22 for US$675/750 ton. Why sell down the stock 9%?

Demand for Biodiesel and Biojet fuel is growing and in deficit in EU on lower supply of refined product from Russia (for obvious reasons). This has and should continue to boost sales volume and prices, to keep pace with rising feed stock (vegetable and animal waste oil and fats).

In my view the EBITDA margin (%) is no what one should focus on, but rather the EBITDA per ton, this is a better gauge of operating performance.

The stock has 25% upside to YE22 with a long growth runway as its capacity expansion in Holland, Singapore and the USA come online plus products that are at the heart of renewable energy and decarbonization.

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