Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Thematic (Sector/Industry)

<ul><li>The risk regarding the government’s policy to subsidize electricity bills through the reduction of Ft will have a direct impact on SPP operators’ earnings.</li><li>In addition, the upward revision to the Thai 10Y bond yield estimate in the house view (to 3.95% in2024E) will have a negative effect on the power sector in terms of debt leverage, as a higher return will be required to offset the elevated funding costs in the future.</li><li>Taking these factors into account, we have revised down our earnings projections for BGRIM and GPSC, as well as their fair values. </li></ul>

The risk regarding the government’s policy to subsidize electricity bills through the reduction of Ft will have a direct impact on SPP operators’ earnings.In addition, the upward revision to the Thai 10Y bond yield estimate in the house view (to 3.95% in2024E) will have a negative effect on the power sector in terms of debt leverage, as a higher return will be required to offset the elevated funding costs in the future.Taking these factors into account, we have revised down our earnings projections for BGRIM and GPSC, as well as their fair values. 

Industry Update – Energy (Power Sector) - October 27, 2023

<ul><li>Thai exports are likely to continue contracting in 2023E amid the economic slowdowns in key trading partners, namely the US and Europe, which are facing risk of recessions.</li><li>However, we view that China’s reopening may boost Thai exports to the country, which have declined for seven straight months, enabling them to eventually turn positive and thereby pushing up the overall export sector this year.</li><li>As for our investment view, we are bearish on export stocks, as they will not only be negatively impacted by the global economic slowdown but also by the appreciation of the baht, especially with the US economy at risk of a recession, as this would reduce the value of export revenue in baht terms for export-related firms.</li></ul>

Thai exports are likely to continue contracting in 2023E amid the economic slowdowns in key trading partners, namely the US and Europe, which are facing risk of recessions.However, we view that China’s reopening may boost Thai exports to the country, which have declined for seven straight months, enabling them to eventually turn positive and thereby pushing up the overall export sector this year.As for our investment view, we are bearish on export stocks, as they will not only be negatively impacted by the global economic slowdown but also by the appreciation of the baht, especially with the US economy at risk of a recession, as this would reduce the value of export revenue in baht terms for export-related firms.

Exports & Imports - Thai Exports in December Contracted by 14.6% YoY

Equity Bottom-Up

<ul><li>BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of Bt668mn.</li><li>Excluding the FX impact, the firm reported a core profit of Bt855mn (+184% YoY, +157% QoQ) in 2Q23.</li><li>The positive factors included the wider margin of electricity sold to industrial users (IU) to Bt1.42/unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1.549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu (-4% YoY, -16% QoQ) amid a slight decline in electricity sold to IU by 3% YoY and 2% QoQ to 834GWh; 2) larger electricity volume sold to EGAT by 7% QoQ to 2,270GWh on the full- quarter contribution of BGPM2R (SPP replacement; COD in March 2023); and 3) larger steam sales volume to IU of 219k tons (+14% YoY, +12% QoQ), offsetting the lower steam price by 7% QoQ in line with the gas price.</li></ul>

BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of Bt668mn.Excluding the FX impact, the firm reported a core profit of Bt855mn (+184% YoY, +157% QoQ) in 2Q23.The positive factors included the wider margin of electricity sold to industrial users (IU) to Bt1.42/unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1.549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu (-4% YoY, -16% QoQ) amid a slight decline in electricity sold to IU by 3% YoY and 2% QoQ to 834GWh; 2) larger electricity volume sold to EGAT by 7% QoQ to 2,270GWh on the full- quarter contribution of BGPM2R (SPP replacement; COD in March 2023); and 3) larger steam sales volume to IU of 219k tons (+14% YoY, +12% QoQ), offsetting the lower steam price by 7% QoQ in line with the gas price.

Earnings Review - B.Grimm Power Plc. (BGRIM)

<div><div><div><div><ul><li>We expect BGRIM to report a 2Q23E net profit of Bt668mn, reversing from the net loss of Bt193mn in 2Q22 and up 68% QoQ.</li><li>The growth catalysts include 1) the wider margin of electricity sold to industrial users (IU) to Bt1 . 5 /unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1 .549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu ( -4% YoY, -16% QoQ); 2) larger electricity volume sold to EGAT by 7% QoQ on the full-quarter contribution of BGPM2R (SPP replacement; COD in March 2023); 3) larger steam sales volume to IU of 218k tons (+13% YoY, +12% QoQ), offsetting the lower steam price.</li><li>Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by effective management of financial activities, resulting in lower finance costs to a similar extent.</li></ul></div></div></div></div>

We expect BGRIM to report a 2Q23E net profit of Bt668mn, reversing from the net loss of Bt193mn in 2Q22 and up 68% QoQ.The growth catalysts include 1) the wider margin of electricity sold to industrial users (IU) to Bt1 . 5 /unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1 .549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu ( -4% YoY, -16% QoQ); 2) larger electricity volume sold to EGAT by 7% QoQ on the full-quarter contribution of BGPM2R (SPP replacement; COD in March 2023); 3) larger steam sales volume to IU of 218k tons (+13% YoY, +12% QoQ), offsetting the lower steam price.Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by effective management of financial activities, resulting in lower finance costs to a similar extent.

B.grimm Power (Bgrim) - Earnings Improvement to Continue in 2Q23E

<ul><li>We initiate BGRIM with an Outperform rating.</li><li>The valuation metrics suggest that the current valuation is still undemanding, with the long- term growth to be driven by new MW additions from the committed projects in the pipeline, against limited tactical risk.</li><li>We have derived a fair value of Bt42.7, based on the earnings yield and a required return of around 3%.</li></ul>

We initiate BGRIM with an Outperform rating.The valuation metrics suggest that the current valuation is still undemanding, with the long- term growth to be driven by new MW additions from the committed projects in the pipeline, against limited tactical risk.We have derived a fair value of Bt42.7, based on the earnings yield and a required return of around 3%.

Company Update - B.GRIMM POWER (BGRIM TB)

Thailand

B.Grimm Power Public Company Limited develops, finances, constructs, and operates green-field power plants in Thailand and internationally. The company generates and distributes electricity to government sectors and industrial users, utilizing a diverse energy mix including gas-fired, solar, hydro, and wind power. It also provides investment holding, maintenance, and operating services for power plants. Headquartered in Bangkok, Thailand, the company was established in 1993 as the energy arm of the B.Grimm Group, which was founded in 1878.

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B.Grimm Power (BGRIM TB)

Industry Update – Energy (Power Sector) - October 27, 2023

The risk regarding the government’s policy to subsidize electricity bills through the reduction of Ft will have a direct impact on SPP operators’...

Krungthai XSpring

Exports & Imports - Thai Exports in December Contracted by 14.6% YoY

Thai exports are likely to continue contracting in 2023E amid the economic slowdowns in key trading partners, namely the US and Europe, which are...

Krungthai XSpring

Earnings Review - B.Grimm Power Plc. (BGRIM)

BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of...

Krungthai XSpring

B.grimm Power (Bgrim) - Earnings Improvement to Continue in 2Q23E

Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by...

Krungthai XSpring

Company Update - B.GRIMM POWER (BGRIM TB)

The valuation metrics suggest that the current valuation is still undemanding, with the long- term growth to be driven by new MW additions from the...

Krungthai XSpring

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