Motor Oil (Hellas) Corinth Refineries

Where we land

Motor Oil makes about half its sales refining fuel at its Corinth refinery in Greece, and a sharp rise in crude prices has lifted the business to a return of 30% on the money its shareholders have invested. We award it gold. That is a judgement on how well the company is run and how much it is earning today, and on both counts it stands well clear of most companies we look at.

The medal comes with a qualification that shapes everything below. We respect what Motor Oil earns now, but we read it as a strong season rather than a new climate. The profits are real and the balance sheet is sound. The weather that produced them, an oil market in upheaval, is unlikely to stay this favourable for ever, and the people who follow the company most closely already expect a less generous year ahead.

What the business is

The group is best understood as a fuel business with two big halves and two small tails. Refining at Corinth, turning crude oil into diesel, jet fuel and petrol, brings in 51% of revenue. Its petrol station networks in Greece, trading as Avin and as Coral under the Shell brand, bring in another 40%. A wholesale power business adds 6%, and storing and moving fuel for others adds the remaining 2%.

This is a high-volume, thin-margin trade. After paying for the crude and other products it sells, the company keeps 14% of each sale, a measure called gross margin. After the costs of running the whole operation, 9% is left, the operating margin. Those are slim figures in absolute terms, because so much of what passes through the till is simply the value of the fuel itself.

The more telling point is how today's figure compares with the company's own history. Over the past five years its gross margin has sat at a middle value of 10%. It has typically moved only about 2 points either side of that. Today's reading is therefore not just good; it is near the top of the band the business has lived within, and that matters for how much weight the current profits can bear.

Why now

The thing driving Motor Oil right now is the oil price. Brent crude, the main international benchmark, stood at $114 a barrel at the end of September. That is up 62% in three months. A refinery's profit depends not on the price of crude itself but on the gap between what it pays for crude and what it can charge for the diesel, jet fuel and petrol it sells, most of which Corinth exports. A sudden shock to supply tends to widen that gap, and the pattern of Motor Oil's recent results fits that story closely.

It came into our Conviction 10 portfolio this month for two plain reasons. It earned the top medal among the refiners, fuel distributors and storage operators we cover, and its share price has been rising faster than almost any other in that group. On the underlying quality of the business it is among the strongest companies we rate.

One thing cuts the other way. Measured against every listed company, its standing on growth has fallen over the past year. That is not a contradiction of the oil story so much as part of it: this year's profits are high, and the expectation that they will not be repeated is pulling down the outlook for growth.

The case for

The most striking signal is what analysts are doing with their numbers. Over the last 45 days there were six upward revisions to earnings forecasts and none downward. That is happening even though the same analysts still expect next year's earnings to come in below this year's. They are, in effect, becoming steadily less pessimistic about how quickly the good times end, which is a meaningful shift for a company whose profits most people assume are about to shrink.

The second strand is the quality of the business itself, which has strengthened through the year. A return on equity, meaning profit as a share of the money shareholders have put in, of 30.2% is an excellent result for any company and an exceptional one for a refiner. Just as important for a business tied to a volatile commodity, it has made a profit in every one of the last 20 quarters. That run of consistency says the group is not merely riding good years; it has stayed profitable through ordinary and difficult ones too.

Put together, these two strands describe a company whose shares have been climbing near the very top of the market, whose underlying quality has improved steadily rather than suddenly, and whose forecasts are moving in its favour. The case for is not that the oil shock will last, but that Motor Oil is a well-run operator making the most of it, and one that analysts keep finding more profitable than they expected.

Where the growth could come from

The refinery is the engine today, and it is the part of the business most exposed to the oil price. A complex refinery like Corinth, able to process heavier and less expensive grades of crude, can see its fuel margins widen sharply during a supply shock, lifting earnings well above normal. That most likely explains both the 23% rise in sales over the past year and the run of upward revisions, though the company does not attribute them this way itself. It also explains why analysts expect a drop in earnings next year: the market is treating today's margins as a peak rather than a new level. What would challenge that view is quarterly results showing refining margins holding up even if crude stops rising, alongside further upgrades to next year's forecasts.

The petrol stations are the steadier half, and right now they are probably under strain. When pump prices climb quickly, retail margins usually lag behind the wholesale cost of fuel, and drivers tend to cut back on how much they buy. Because much of the stations' 40% share of revenue is simply the value of fuel passing through, their share of profit is likely smaller than that figure suggests. The role of this business is to cushion the group when refining margins are weak, and if it is being squeezed during the spike, part of the refining windfall is being given back. Stable volumes and steady profit per litre at the stations in coming results would show that cushion is intact.

Power is small but growing, and it is the clearest attempt to make the group less dependent on refining. European natural gas prices are up 56% over the past year, which pushes up the price of wholesale electricity, and the company has been building gas-fired generation and renewable capacity through its MORE unit. Higher power prices help wind and solar output sold at market rates, so this line could grow faster than the core. The catch is that interest rates are rising, with both the European Central Bank and the US Federal Reserve raising rates in September, and that makes debt-funded renewable projects more expensive. The proof would be power revenue outpacing the group as a whole, new capacity coming online, and the company reporting a clear profit from the segment.

The smallest piece is storage and transport, which earns fees for tank space and fuel logistics. Alongside it, the company has pursued a floating terminal at Corinth for importing liquefied natural gas, known as Dioriga Gas, a project that gains relevance as Europe's gas prices climb and security of supply matters again. Fee income does not swing with oil margins, so growth here would make earnings steadier, and an operating import terminal would add a new contracted income stream. For now it is an option rather than an engine; long-term capacity bookings or a final decision to build would be the signs it is becoming more than that.

The case against

The plainest argument against is that the market already expects these profits to shrink. Analysts forecast earnings per share of 11.31 this year. For next year they forecast 8.29. That is a fall of about 27%, and the company's growth standing across the market has slid over both six and twelve months to well below the middle. Even the run of upgrades has only made the expected decline less severe; it has not removed it.

The margin history gives that forecast teeth. Gross margin today is 13.6%. Over the last 20 quarters its middle value has been 10%, and the usual swing either side has been only 2 points. Today's figure sits roughly two of those typical swings above normal, which for a business with such a stable record is a long way out, and the natural direction from there is back towards the middle.

The source of the windfall is also its main hazard. Crude oil is the refinery's biggest cost, and it has just jumped 62% in three months. A move that violent in a refiner's main input can widen the gap between crude and fuel prices, as it seems to have done, but it can also compress it if product prices fail to keep pace, and the published figures do not pin down exactly how the crude move has flowed into Corinth's margins. That makes it a source of uncertainty rather than a guaranteed benefit.

Seen against its peers, the company's margins look like what they are. Its gross and operating margins trail those of Equinor, OMV, ExxonMobil and Galp, and only MOL runs thinner. That fits a business where refining and petrol stations make up over 90% of revenue, and it means there is less cushion if the spread between crude and fuel narrows.

There are two points in the company's favour that a sceptic has to weigh. It is among the cheapest in its peer group, valued at 6 times its earnings. ExxonMobil, Equinor, OMV, Galp and MOL range from 9 times to 21 times. Only its Greek rival HELLENiQ Energy is cheaper, at 5 times, and it ranks clearly lower on quality. The trouble with a low multiple on peak-season profits is that it can be a trap: the shares look cheap because the earnings underneath them are expected to shrink.

Rising interest rates are a smaller worry here than for many companies. Euro-area 10-year government borrowing costs are up 0.80 points over a year. But net debt is only 0.2 times shareholders' equity, so higher borrowing costs bite less on the balance sheet, though they still matter for the debt-funded power projects.

What the price assumes

The shares have already moved a long way. They are up 175% over the past year. Over the last six months alone they have risen 82%. A rise of that size invites the question of whether the price now demands more than the business can deliver.

The answer is that it demands surprisingly little. If the share price stayed where it is and, in five years, the market valued Motor Oil at 18.4 times earnings, the middle value for every profitable listed company we cover, earnings per share would need to reach only 3.79. Getting there would mean earnings shrinking by 19% a year for five straight years. Put differently, the price already allows for the windfall to unwind substantially.

We do not set that against a projection of our own, because Motor Oil's earnings have moved too unevenly to show a trend worth extending. What can be said is that the forecast decline analysts expect for next year is milder than the pace of shrinkage the price would tolerate, so the market is not paying for the current season to last.

The other side of the medal

The one risk worth keeping in view above all others is simple: refining profits swell with an oil shock and shrink when the shock passes. Analysts are already pencilling in a 27% drop in earnings per share next year, and the question is whether that proves too gentle.

This is the risk for Motor Oil, rather than one among many, because it sits underneath almost every strength in the case for. The 30% return on equity, the margin well above its norm, the upgrades and the share price surge all trace back to the same source. Sales are up 23% on a year ago, yet over three years they have fallen 2% a year, a reminder of what the business looks like in calmer conditions. Its growth standing has already slipped into the lower part of the market over the year.

The signs of it arriving would be specific. Refining margins narrowing even while crude stays high, gross margin drifting back towards its five-year middle, and analysts beginning to cut rather than raise their forecasts would together say that the season is ending faster than the market expects.

What to watch

Over the next two quarterly reports, the central question is whether refining margins, the gap between what Corinth pays for crude and what it earns on fuel, hold up if crude stops rising. Alongside that, watch whether analysts keep raising their forecasts as they have recently, with six upgrades and no cuts in six weeks.

Our reading would be wrong if gross margin slipped back from 13.6% towards its five-year middle of about 10%. It would be wrong, too, if upgrades turned into downgrades and next year's earnings fell further than the 27% now forecast. In that case, the low valuation of 6 times earnings would turn out to be a value trap rather than a bargain, and the gold would belong to a season that had already passed.

The numbers

The same industry, for comparison

Research for information, not personal investment advice or a recommendation to buy, sell or hold any security: see Important information. Data as at 30 September 2026.