Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<p><strong>We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ).</strong></p><div>• The YoY surge will be from 20% and 13% growth in sales volume and  average product selling price (ASP) respectively.</div><div></div><div>• While QoQ growth will be due to lower hedging loss of US$40m expected in 3Q, compared a US$127m loss incurred in 2Q.</div><div></div><div>• The sales volume is expected to drop QoQ in 3Q21 due to lower nomination from PTT, while ASP should improve following the crude oil price rally. The reference Dubai crude oil price surged to US$72/bbl in 3Q21 (+67% YoY, +7% QoQ)</div><div></div><div>• Bright 4Q21 earnings outlook backed by growing sales volume, and solid average selling price as crude oil price is expected to continue the rally.</div><div></div><div><strong>We maintain the BUY  recommendation based on a target price of Bt146, derived using  DCF methodology (WACC 9.4%, TG 2%). Our valuation implies 11x PE’22.</strong></div>

We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ).• The YoY surge will be from 20% and 13% growth in sales volume and  average product selling price (ASP) respectively.• While QoQ growth will be due to lower hedging loss of US$40m expected in 3Q, compared a US$127m loss incurred in 2Q.• The sales volume is expected to drop QoQ in 3Q21 due to lower nomination from PTT, while ASP should improve following the crude oil price rally. The reference Dubai crude oil price surged to US$72/bbl in 3Q21 (+67% YoY, +7% QoQ)• Bright 4Q21 earnings outlook backed by growing sales volume, and solid average selling price as crude oil price is expected to continue the rally.We maintain the BUY  recommendation based on a target price of Bt146, derived using  DCF methodology (WACC 9.4%, TG 2%). Our valuation implies 11x PE’22.

PTTEP: Solid Product Prices to Drive 3Q21 Earnings

<p><strong>Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY rating given the narrow impact to our 2021 earnings forecast and bright 4Q21-2022 outlook. Our target price of Bt146.00 is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.</strong></p><div>• Expect 3Q21 recurring net profit to improve YoY backed by higher sale volume (+18% YoY) and average selling price (+10% YoY), while soften QoQ due to drop in volume sales (-9% QoQ) dragged by lower nomination from PTT (because of gas separation plant shutdown).</div><div></div><div>• Positive 2021-22 earnings outlook as the sales volume will increase by +16% YoY to 412kBOED in 2021 and 486kBOED in 2022 (+18% YoY).</div><div></div><div>• PTTEP targets to expand its production to 700kBOED by 2030 (+6% CAGR from 2021 level) to maintain steady long-term growth. The company also plans  to achieve 20% of net income contribution from non-E&amp;P business (ARV, Power and CCU) by 2030.</div>

Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY rating given the narrow impact to our 2021 earnings forecast and bright 4Q21-2022 outlook. Our target price of Bt146.00 is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.• Expect 3Q21 recurring net profit to improve YoY backed by higher sale volume (+18% YoY) and average selling price (+10% YoY), while soften QoQ due to drop in volume sales (-9% QoQ) dragged by lower nomination from PTT (because of gas separation plant shutdown).• Positive 2021-22 earnings outlook as the sales volume will increase by +16% YoY to 412kBOED in 2021 and 486kBOED in 2022 (+18% YoY).• PTTEP targets to expand its production to 700kBOED by 2030 (+6% CAGR from 2021 level) to maintain steady long-term growth. The company also plans  to achieve 20% of net income contribution from non-E&amp;P business (ARV, Power and CCU) by 2030.

PTTEP: Temporary Weak 3Q21 Operation Due to Lower Gas Nomination

Thematic (Sector/Industry)

<h2>Energy Sector: Overweight E&amp;P, Neutral on Refinery and Petrochemical</h2>
<h3>Crude: Solid OPEC+ supply curbs to push crude price up</h3>
<div>• Brent crude oil price spiked to US$75.0/bbl in early July, a two-year high. We see the crude price to maintain at high levels supported by OPEC+ controlled production measures and rising demand from strong global economic recovery after vaccine rollout. We maintain our bullish outlook for 3Q21 and expect the Brent crude rise and maintain at US$80/bbl level. PTTEP is our top pick,</div>
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<h3>Refinery: Low pace GRM recovery due to dragged economic growth</h3>
<p>• We expect the gasoline and diesel demand to rise gradually supported by US and EU economic recovery. While jet fuel demand will continue to be under pressure from pandemic-led air travel restrictions. Thus, we expect the GRM to remain flat during 3Q21 and gradually recover by 4Q21. Maintain short-term neutral view on TOP, SPRC, BCP.</p>
<h3>Petrochemicals: Back to pre-Covid oversupply</h3>
<div>• We expect olefin spread to weaken in 2H21 as PE capacity at 7 MTA (6% global capacity) and PP capacity at 6.4 MTA (6% global capacity) will be commercialized in 2H21. we expect polyester and PET demand to fall in 2H21 due to seasonality. Meanwhile, we expect the aromatic spread to remain healthy. PX spread will be supported by new capacity in downstream PTA products from China while BZ demand remains strong from electronics appliance production and downstream (SM) new capacity. Thus, due to the weak 2H21 earnings outlook, we have a neutral view on PTTGC.</div>
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<div class="content-caption">Sources: CGS Research, company data. Notes: Valuation summary of stocks under CGS coverage, as of 9 July 2021 ,</div>
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Energy Sector: Overweight E&amp;P, Neutral on Refinery and Petrochemical
Crude: Solid OPEC+ supply curbs to push crude price up
• Brent crude oil price spiked to US$75.0/bbl in early July, a two-year high. We see the crude price to maintain at high levels supported by OPEC+ controlled production measures and rising demand from strong global economic recovery after vaccine rollout. We maintain our bullish outlook for 3Q21 and expect the Brent crude rise and maintain at US$80/bbl level. PTTEP is our top pick,

Refinery: Low pace GRM recovery due to dragged economic growth
• We expect the gasoline and diesel demand to rise gradually supported by US and EU economic recovery. While jet fuel demand will continue to be under pressure from pandemic-led air travel restrictions. Thus, we expect the GRM to remain flat during 3Q21 and gradually recover by 4Q21. Maintain short-term neutral view on TOP, SPRC, BCP.
Petrochemicals: Back to pre-Covid oversupply
• We expect olefin spread to weaken in 2H21 as PE capacity at 7 MTA (6% global capacity) and PP capacity at 6.4 MTA (6% global capacity) will be commercialized in 2H21. we expect polyester and PET demand to fall in 2H21 due to seasonality. Meanwhile, we expect the aromatic spread to remain healthy. PX spread will be supported by new capacity in downstream PTA products from China while BZ demand remains strong from electronics appliance production and downstream (SM) new capacity. Thus, due to the weak 2H21 earnings outlook, we have a neutral view on PTTGC.










Sources: CGS Research, company data. Notes: Valuation summary of stocks under CGS coverage, as of 9 July 2021 ,




<p><strong>We expect PTTEP to post a solid 2Q21 net profit of Bt9.6bn (+121% YoY, -17% QoQ) on the back of improved sales and average selling price, after hit by pandemic in  2Q20.</strong></p><p>• The YoY surge is mainly attributed to 33% growth in sales volume and  115% spike in reference Dubai crude oil price. While QoQ slump is due to absence of Bt10.7bn booked in 1Q21 from bargain purchase of Oman block 61 project.</p><p>• Bright 2021 earnings outlook  with a 98% EPS growth on the back of improved volume sales (+14% YoY) and recovering crude oil price (+60% YoY).</p><div>• Revise up our 2021-23 earnings forecast on the back of 8-to-22% growth in crude oil sales price assumption.</div><div></div><div><strong>We maintain the BUY  recommendation, while upgrade our target price by 11% to Bt146, on the back of +32-to-41% earnings revision for 2021-23 period considering better crude oil price outlook. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.</strong></div>

We expect PTTEP to post a solid 2Q21 net profit of Bt9.6bn (+121% YoY, -17% QoQ) on the back of improved sales and average selling price, after hit by pandemic in  2Q20.• The YoY surge is mainly attributed to 33% growth in sales volume and  115% spike in reference Dubai crude oil price. While QoQ slump is due to absence of Bt10.7bn booked in 1Q21 from bargain purchase of Oman block 61 project.• Bright 2021 earnings outlook  with a 98% EPS growth on the back of improved volume sales (+14% YoY) and recovering crude oil price (+60% YoY).• Revise up our 2021-23 earnings forecast on the back of 8-to-22% growth in crude oil sales price assumption.We maintain the BUY  recommendation, while upgrade our target price by 11% to Bt146, on the back of +32-to-41% earnings revision for 2021-23 period considering better crude oil price outlook. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.

PTTEP: Record Sales to Drive 2Q21 Earnings

<p><strong>Yesterday analyst meeting came out in a positive tone. We maintain the BUY recommendation with a target price of Bt131.0 derived using DCF methodology (WACC 9.4%, TG 2%), implying 13.4x PE’22.</strong></p><div>• PTTEP reported 1Q21 net profit of Bt11.5bn (+34% YoY, +3565 QoQ). The strong earnings growth was supported by improved sales revenue and Bt10,7bn gain from bargain purchase of Oman block 61 project.</div><div></div><div>• Excluding non-recurring items (FX, oil hedging etc) the core profit was at Bt8.8bn (-3% YoY, +66% QoQ).</div><div></div><div>• Bright 2Q21 earnings outlook as the sales volume is expected to improve to 416 kBOED (+27% YoY, +9% QoQ), while average sales price should stabilize at US$41/bbl (+17% YoY, +2% QoQ).</div><div></div><div>• No impact on PTTEP operations from Myanmar political situation, force majeure declared for Mozambique Area 1 project.</div>

Yesterday analyst meeting came out in a positive tone. We maintain the BUY recommendation with a target price of Bt131.0 derived using DCF methodology (WACC 9.4%, TG 2%), implying 13.4x PE’22.• PTTEP reported 1Q21 net profit of Bt11.5bn (+34% YoY, +3565 QoQ). The strong earnings growth was supported by improved sales revenue and Bt10,7bn gain from bargain purchase of Oman block 61 project.• Excluding non-recurring items (FX, oil hedging etc) the core profit was at Bt8.8bn (-3% YoY, +66% QoQ).• Bright 2Q21 earnings outlook as the sales volume is expected to improve to 416 kBOED (+27% YoY, +9% QoQ), while average sales price should stabilize at US$41/bbl (+17% YoY, +2% QoQ).• No impact on PTTEP operations from Myanmar political situation, force majeure declared for Mozambique Area 1 project.

PTTEP: Strong Operations to Support 2Q21 Earnings and Ahead

Thailand

PTT Exploration and Production Public Company Limited explores for crude oil and natural gas, develops fields for production, and produces oil and natural gas. The Company is a subsidiary of the Petroleum Authority of Thailand.

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PTT E&P (PTTEP TB)

PTTEP: Solid Product Prices to Drive 3Q21 Earnings

We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ). We maintain the BUY recommendation based on a target price of...

Pi Securities PCL, Thailand

PTTEP: Temporary Weak 3Q21 Operation Due to Lower Gas Nomination

Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY...

Pi Securities PCL, Thailand

Energy Sector Outlook 3Q21

We maintain the BUY recommendation based on a target price of Bt146, derived using DCF methodology (WACC 9.4%, TG 2%). Our valuation implies 11x...

Pi Securities PCL, Thailand

PTTEP: Record Sales to Drive 2Q21 Earnings

We expect PTTEP to post a solid 2Q21 net profit of Bt9.6bn (+121% YoY, -17% QoQ) on the back of improved sales and average selling price, after hit...

Pi Securities PCL, Thailand

PTTEP: Strong Operations to Support 2Q21 Earnings and Ahead

Yesterday analyst meeting came out in a positive tone. We maintain the BUY recommendation with a target price of Bt131.0 derived using DCF...

Pi Securities PCL, Thailand

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