Neste Oil Oyj, Finland’s only refiner, gained the most in two months in Helsinki trading after Nordea Bank AB raised its rating on the stock, saying cheap palm oil will improve profits in the biodiesel business.
Neste Oil climbed 4.6 percent to 11.50 euros at 1:10 p.m., the biggest intraday gain since Jan. 30. It was the top performer on the Stoxx Europe 600 Oil & Gas index.
Palm oil for delivery in June yesterday closed at the lowest price this year on the Malaysia Derivatives Exchange. Stockpiles in February were at 2.44 million metric tons, near an all-time high of 2.63 million tons reached in December, according to the Malaysian Palm Oil Board. Prices are likely to drop further in the second quarter as Malaysia and Indonesia boost output as palm forest reaches maturity, Nordea said.
“We expect the sun to shine on Neste Oil this spring,” Pasi Vaeisaenen, an analyst at Nordea, said in a report. He raised his recommendation to strong buy from buy, keeping the 12-month price target at 14 euros. “Consensus is not yet taking into account the lower palm oil prices, offering an excellent buying opportunity.”
Neste Oil forecast its renewable fuels unit will become profitable this year after delivering an operating loss of 2 million euros ($2.6 million) in the fourth quarter, it said Feb. 5. Biodiesel from palm oil could contribute 97 million euros in earnings before interest and taxes, compared with a “ridiculously low” market consensus estimate of 42 million, Vaeisaenen said.
“Sluggish demand has lowered rapeseed oil prices, but not by as much as palm oil prices,” he said. “With these spreads, Neste Oil will make real money in the biodiesel business.”