UPDATE: Deutsche Bank Initiates Coverage Of Phillips 66 On Exposure To Secular Growth

Deutsche Bank initiated coverage of Phillips 66 (NYSE: PSX) on Wednesday with a Hold rating and price target of $99.

In Wednesday’s report, analysts Ryan Todd and Igor Grinman explained that Phillips 66 offers “investors significant (and growing) exposure to secular growth in the low-volatility/high-quality, structurally advantaged midstream and chemicals businesses.”

According to Todd, Phillips 66 has “defensive (refining margin standpoint) characteristics and relatively attractive valuation under both bearish and bullish refining case scenarios” and these “bode well for the name over the medium term. However, given our relatively bullish stance on the US refining space over the medium term, we see stronger investment cases elsewhere.”

The report noted that a “decrease in ethylene, polyethylene and/or SA&S (specialties, aromatics and styrenics) would negatively impact PSX’s cash flows; conversely, any strength in the aforementioned chemicals would benefit” the company.

The price target for Phillips 66 “incorporates nearly $7/share of value related to the 2017 ethane cracker.”  Todd believed “2016 consensus estimates (- 3 percent/-2 percent versus DBe onEPS/EBITDA) similarly largely reflect upside related to incremental near-term projects.”

Phillips 66 recently traded at $78.51, down 0.82 percent.