UBS Group AG calls to buy Exxon Mobil Corporation (XOM.US): The refining business is undervalued, target price expected to increase by over 20%.

Analysts at UBS Group AG point out that the global refining business of Exxon Mobil Corporation (XOM.US) is currently severely undervalued by investors, and is expected to bring substantial profit growth and cash flow boost to the company in the remaining time of this decade. Led by analyst Manav Gupta, the analyst team calculated that Exxon Mobil Corporation has a total refining capacity of nearly 4.1 million barrels per day in 15 refineries worldwide. This scale advantage not only provides stable support for the company's earnings, but also hedges the risks of falling oil prices. UBS Group AG estimates that for every 1 dollar increase in refining margin, Exxon Mobil Corporation's annual profit in the energy products division could increase by approximately $800 million. In a client report released on January 9th, UBS Group AG mentioned that it is expected that Exxon Mobil Corporation's downstream energy products business will have a free cash flow of around $3.6 billion by 2026, climbing to around $5 billion by 2029. This cash flow is estimated to account for around 10% of the company's total free cash flow, while also covering over a quarter of dividend commitments. UBS Group AG calculated that in the middle of the industry cycle, the pre-tax profit of Exxon Mobil Corporation's refining assets could reach around $6.3 billion, with the Gulf Coast of the United States, Europe, and Canada being the most prominent contributors. The institution emphasizes that Exxon Mobil Corporation holds a strong position in the processing of heavy sulfur crude oil, particularly in efficiently handling crude oil from Venezuela; its refining facilities on the Gulf Coast are well-equipped and are expected to benefit fully from market conditions with widened quality price differentials. The report also points out that Exxon Mobil Corporation's recent and ongoing upgrade projects at large refineries such as Beaumont, Baton Rouge, and Baytown will gradually increase the production rates and expand the proportion of high value-added fuels and base oils. UBS Group AG believes that even in the event of weakening oil prices in the future, these upgrade investments along with cautious capital spending strategies will continue to support the steady improvement of the company's downstream business profitability. Currently, UBS Group AG maintains a "buy" rating on Exxon Mobil Corporation with a 12-month target price of $145, which represents over 20% upside potential from the company's recent stock price. UBS Group AG states that the current valuation multiples of Exxon Mobil Corporation are lower than historical averages and do not fully reflect the earnings resilience and profit potential of its refining and integrated business.