TUPRAS. Still deserves attention: BUY maintained COMPANY UPDATE. Ratings & Actions. Target. S/T Rating. Upside (Downside) 16% (Maintained)

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1 TURKEY April 28, 215 COMPANY UPDATE TUPRAS Still deserves attention: BUY maintained We raise our target price to TRL76.7 from TRL67.7/share for TUPRS, as we tweak upwards our forecasts related to residuum upgrade project (RUP) and update our peer multiples comparison. We keep our BUY/OUTPERFORM ratings, as our new target price points to a 16% upside potential, while the imminent launch of RUP and a possible interim dividend payout in 2H15 look to be key catalysts in the S/T. Despite a strong run so far, TUPRS still trades at a discount to global peer averages on near term P/E multiples. Operating performance impressive ytd - Thanks to a strong net refining margin and the favourable impact of FX rates, we estimate 35% yoy EBITDA growth (in TRL terms) for 1Q15. We also expect a healthy operating performance to have been sustained in April, as benchmark refining margins remain robust and the TRL slides further vs. the US$. RUP to lend fresh impetus to growth - Following the launch of RUP by mid-may 215, we foresee a major improvement in s financials, with a contribution to EBITDA of US$365mn in 215E and US$6mn in 216E (up from US$55mn previously). We see even some upside risk to these estimates. We forecast 8% CAGR in EBITDA for within A possible increase in crude supply from Iran - In order to comply with EU and US sanctions against Iran, cut its imports from this country by 46% within 211 to 214. Sanctions are expected to be lifted in June 215, which would be favourable for s refining margins and payment terms, in our view. Hefty dividend payouts in 215E-216E - We expect to pay out TRL2.9/share dividend (4.4% yield) in 2H15. Dividend should increase by 65% yoy to TRL4.8 per share (7.2% yield) in 216, with the help of additional profitability from the RUP. Attractive 215E-216E multiples - Despite a 44% climb ytd, TUPRS shares still trade at an 11% discount on both 215E and 216E P/E. We believe a premium to peers would be justifiable, though, given strong growth and dividend payout potential. Consolidated Financials and Multiples (US$mn) 213 Δ 214 Δ 215E Δ 216E Δ 217E Δ Revenue 21,57-18% 18,138-16% 12,495-31% 14,442 16% 14,522 1% EBITDA % 36-32% % 1,168 18% 1,171 % Net Income % 677 8% % % 648 1% Adj. Net Income 6 n.m. 79 n.m % % 648 1% Adjusted P/E n.m EV/EBITDA Ratings & Actions L/T Rating S/T Rating Target Target Price BUY (Maintained) OUTPERFORM (Maintained) TRL76.7 Upside (Downside) 16% Share Data Ticker Close Price TUPRS.TI / TUPRS.IS TRL66.4 Current MCap. (TRL/US$ mn) 16,628 / 6,14 Number of Shares (mn) Free Float 49% 3m Avg. Daily Turnover (TRL/US$ mn) / Trading Range (High / Low) 1-month 66.6 / year 66.6 / Ytd 66.6 / 35.8 Performance Absolute Relative 1-month 12% 5% 3-month 21% 27% 1-year 39% 15% Ytd 44% 3% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 as of April 27, 215 Relativ es are against the ISE-1 Performance Index Dec-14 Price (LHS) Rel. Perf. (RHS) Apr Umut Ozturk umut.ozturk@burgansecurities.com EV/SALES Div. Yield 7.1% 3.5% 4.4% 7.2% 8.3%

2 Income Statement (US$mn) E 216E 217E Revenues 21,57 18,138 12,495 14,442 14,522 COGS -2,771-17,598-11,448-13,175-13,249 Gross Profit ,82 1,33 1,38 Operational expenses EBIT EBITDA ,168 1,171 Other income, net Profit/loss from subsidiaries Financial income, net Profit before tax Tax Profit from continuing operations Minority interest Reported net earnings Adjusted net earnings Reported EPS DPS Balance Sheet (US$mn) E 216E 217E Cash & Equivalents 1,72 1,673 1, Receivables Inventories 1,623 1, Fixed Assets 3,97 4,577 4,589 4,61 4,613 Goodwill & Intangibles Other Assets 1,718 2,47 1,217 1,365 1,295 Total Assets 9,94 9,413 8,228 8,533 8,46 Total Debt 3,62 3,328 2,925 2,691 2,45 Payables 3,263 2,486 1,82 2,73 2,82 Other Liabilities 1, Shareholders' Equity 2,412 2,666 2,947 3,147 3,284 Net Debt 1,342 1,655 1,492 1,755 1,591 Company Description is Turkey s largest industrial company with an annual refining capacity of 28.1mn. The Company, with its 2.3mntonne crude oil and 3.7mn-tonne product storage capacity, accounts for more than 6% of the country s storage capacity. Based on Nelson Complexity Index, s refinery complexity, a key indicator for technical ratings of refineries, reached 7.25, implying a medium-to-high level of refinery complexity. The Company s refinery complexity is expected to increase further and to exceed 1 with the Residuum Upgrade Project at the Izmit refinery, which will transform surplus fuel oil production into white products. Ownership Structure Cash Flow Summary (US$mn) E 216E 217E Net earnings Depreciation Δ in WCR -1, Taxes CAPEX -1, Dividend paid Δ in borrowing Other cash in/out Cash generated during the year Cash at the end of the year 1,72 1,673 1, Growth E 216E 217E Sales -18% -16% -31% 16% 1% EBITDA -29% -32% 176% 18% % Net earnings -23% 8% -19% 17% 1% Free Float; 49% Energy Invest ments Co.; 51% Key financial ratios E 216E 217E ROE.2% 3.1% 16.6% 21.% 2.1% ROIC.1% 1.3% 8.% 1.9% 11.3% EBITDA Margin 2.5% 2.% 7.9% 8.1% 8.1% Free cash flow margin 1.8% 2.1% 6.2% 11.5% 11.6% Net Margin 2.9% 3.7% 4.4% 4.4% 4.5% Net debt/equity 55.6% 62.1% 5.6% 55.8% 48.4% Net debt/ebitda 252.9% 459.4% 15.2% 15.3% 135.9% ST borrowings/t. borrowings 16.5% 1.% 7.9% 9.9% 1.9% Equity/Total Assets 24.4% 28.3% 35.8% 36.9% 39.1% Current Ratio 94% 82% 1% 93% 91% Pay-out Ratio 65% 28% 4% 8% 8% Valuation Metrics E 216E 217E Net refining margin (US$/bbl) Med comp. Ref. Marg. (US$/bbl) EBITDA per ton (US$/t)

3 VALUATION We value using a combination of DCF and international peer comparison analyses, to which we assign 6% and 4% respective weights. We calculate the 12-month target price at TRL76.7 per share. At the current price of TRL66.4, the shares offer 16% upside potential over the next 12- month period. Exhibit 1: Valuation Summary Weight Price per Share (%) (TRL) Discounted Cash Flow Global peer average Month Target Price 76.7 Current Price 66.4 Upside potential 16% DCF VALUATION Exhibit 2: DCF Valuation (US$mn) E 216E 217E 218E 219E 22E 221E 225E EBITDA ,168 1,171 1,182 1,185 1,188 1,22 1,28 EBITDA per tonne EBITDA margin 2.% 7.9% 8.1% 8.1% 8.1% 8.1% 8.% 8.3% 8.1% Decline (Increase) in W/C Operating Cash Flow 1, ,173 1,184 1,187 1,191 1,194 1,21 Tax Capital expenditures -1, Free Cash Flow Discount Factor Discounted Cash Flows PV of Cash Flows 5,59 Terminal Growth % Terminal Value 8,356 NPV of Terminal Value 2,987 Sum of NPVs 8,47 Net Debt (end 215) 1,489 Minority interest 24 Equity Value 6,581 +4% stake in OPET m target value 7,727 3

4 WACC (US$) E 216E 217E 218E 219E 22E 221E 225E Debt/Asset 55.5% 49.8% 46.1% 42.7% 39.4% 36.2% 33.2% 3.3% 21.2% Equity 44.5% 5.2% 53.9% 57.3% 6.6% 63.8% 66.8% 69.7% 78.8% Cost of equity 11.% 11.% 11.% 11.% 11.% 11.% 11.% 11.% 11.% Cost of debt 9.% 9.% 9.% 9.% 9.% 9.% 9.% 9.% 9.% Cost of debt-after tax 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% WACC 8.9% 9.1% 9.2% 9.4% 9.5% 9.6% 9.7% 9.8% 1.2% Peer Multiples Analysis According to the international peer comparison, trades at an 11% discount both on 215E and 216E P/E multiples. On the other hand, it trades at premiums of 23% and 7% when respective EV/EBITDA multiples are considered, which we attribute to the high net debt position driven by the RUP investment. Our peer multiples analysis provides a 12-month target value of US$6.5bn for. Exhibit 3: Peer Multiples Analysis (US$mn) EV/EBITDA P/E 215E 216E 215E 216E S-OIL CORPORATION 9.7x 9.x 15.3x 13.2x SHOWA SHELL SEKIYU 7.5x 6.8x 16.1x 12.2x VALERO 4.4x 4.8x 8.7x 9.1x KRONOS 9.1x 6.2x 15.5x 16.5x OMV AG 4.7x 3.8x 16.2x 1.7x MOL 5.x 4.4x 11.x 1.1x NESTE OIL 8.3x 7.9x 14.6x 13.3x ERG 5.9x 6.x 22.7x 22.7x MOTOR OIL (HELLAS) 4.8x 4.8x 6.6x 6.2x HELLENIC PETROLEUM 3.9x 4.1x 7.2x 6.6x PKN 6.2x 6.x 1.6x 1.2x Global median 5.9x 6.x 14.6x 1.7x TUPRAS 7.3x 6.4x 13.1x 9.6x Premium/discount of to global peers 23% 7% -11% -11% Implied fair value 4,394 5,495 6,839 6,829 Average implied fair value 5, m target value 6,537, Bloomberg 4

5 Exhibit 4: vs. peers: average ROE (%) Exhibit 5: vs. peers: average ROA (%) Exhibit 6: vs. peers: E EBITDA growth (%) 8 Exhibit 7: vs. peers: 216E dividend yield (%) Exhibit 8: net refining margins (US$/bbl) Exhibit 9: Med complex gross refining margins (US$/bbl) E 216E E 216E 5

6 Burgan Securities - Equity Rating System 12-month Rating: Our 12-month rating system comprises the following designations: BUY (B), HOLD (H), SELL (S). The absolute upside to target value implied by the current market capitalisation is the main determinant of our rating system. Valuation tools employed most frequently are Discounted Cash Flow (DCF) and international peer group comparison, though other metrics such as historical relative valuation, price to book, return on equity, replacement value are also used wherever appropriate. Our analysts set the fair/target values with a 12-month investment horizon. Comparing the upside in a specific stock with the market s upside (determined through the aggregate upside of our coverage based on free float Mcaps), in addition to taking other yardsticks into consideration, analysts recommend BUY (B), HOLD (H), SELL (S) based on their 12-month total return views. Sector Rating Our investment horizon for industry ratings is again 12 months. This rating gives an indication as to how the analyst sees that particular industry for the next 12-month period in terms of growth, profitability, pricing power, competitive dynamics etc. The rating in this category thus reflects our analyst s assessment of the conjunctural outlook for the industry, without involving any specific benchmarks. The ratings employed are Overweight (OW), Neutral (N), Underweight (UW). Overweight (OW): Due to improving sector related fundamentals and/or attractive valuations, the sector index is expected to perform better than the BIST-1 in the next 12-months Neutral (N): The sector index is expected to perform in line with the BIST-1 in the next 12-months Underweight (UW): Due to worsening sector related fundamentals and/or expensive valuations, the sector index is expected to perform worse than the BIST-1 in the next 12-months Short-term Rating: Our short-term rating system comprises the following designations: OUTPERFORM (OP), MARKETPERFORM (MP), UNDERPERFORM (UP). Considering possible triggers, catalysts, and/or company, sector & market views, we rate the stocks as: Outperform (OP): If 3-month total return is expected to exceed the BIST-1 (sector index if specified) by more than 1% S/T Stock Rating Summary Relative Return Outperform (OP) >=1% Marketperform (MP) <+1% & >-1% Underperform (UP) <=-1% Marketperform (MP): If 3-month total return is expected to be in line (+/- 1%) with the BIST-1 (Peerperform if sector index is specified) Underperform (UP): If 3-month total return is expected to be below the BIST-1 (sector index if specified) by more than 1% To have a more balanced distribution of ratings, Burgan Securities has requested that analysts maintain at least 2% of their ratings as Underperform and no more than 25% as Outperform, subject to change depending on market conditions. Other Qualifiers Utilised: NR: Not Rated NC: Not Covered UR: Under Review Market Call Our equity market call has an investment horizon of 3-12 months. Our market calls are BUY, NEUTRAL, SELL.

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