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

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Thai Equity - Bottom-up - Equities

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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

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 ,




Equity Bottom-Up

<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

<p><strong>Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume growth and improve GPM  beginning 2021.</strong></p><div>• Expect 1Q21 earnings to soften YoY mainly due to decline in average selling price. While improve Q0Q as there will be no significant losses from financial instrument and asset impairment compared to 4Q20.</div><div></div><div>• The Oman Block 61 gas project is anticipated to be the new growth driver for PTTEP given 1) Increase in volume sales by 10% 2)  higher EBITDA margin, and 3)substantial reserve addition (0.5 to 1 year).</div><div></div><div>• Bright 2021 earnings outlook as the new investment in Oman will increase the volume sales to 398 kBOED (+12% YoY, and 6% higher than previous guidance of 375 kBOED) and improving GPM from lower unit cost (-6% YoY)</div><p></p><p><strong>We maintain our BUY  recommendation, while revise up the target price to Bt131 (from previous Bt125) on the back of the earnings revision incorporating Oman Block 61 project. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16x PE’21.</strong></p>

Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume growth and improve GPM  beginning 2021.• Expect 1Q21 earnings to soften YoY mainly due to decline in average selling price. While improve Q0Q as there will be no significant losses from financial instrument and asset impairment compared to 4Q20.• The Oman Block 61 gas project is anticipated to be the new growth driver for PTTEP given 1) Increase in volume sales by 10% 2)  higher EBITDA margin, and 3)substantial reserve addition (0.5 to 1 year).• Bright 2021 earnings outlook as the new investment in Oman will increase the volume sales to 398 kBOED (+12% YoY, and 6% higher than previous guidance of 375 kBOED) and improving GPM from lower unit cost (-6% YoY)We maintain our BUY  recommendation, while revise up the target price to Bt131 (from previous Bt125) on the back of the earnings revision incorporating Oman Block 61 project. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16x PE’21.

PTTEP: Oman Block 61 Gas Project to Be New Growth Driver

<p><strong>Crude: Bright E&amp;P business performance from recovering crude price</strong></p><ul><li>We expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021. <strong> PTTEP is our top pick</strong>, the E&amp;P business will most benefit from recovering crude price.</li></ul><p><strong>Refinery: Improving product demand to drive GRM</strong></p><ul><li>Thai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). <strong>TOP is our top pick </strong>among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).</li></ul><p><strong>Petrochemicals: Benefit from global recovery</strong></p><ul><li>We foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). <strong>PTTGC is our top pick</strong> as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.</li></ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/642/original/SMK1.png?1611645077" class="editor-image img-responsive" data-smartkarma-image-id="184642"></figure><p style="text-align: center;"><strong>Valuation Summary*</strong></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/643/original/Picture1.jpg?1611645252" class="editor-image img-responsive" data-smartkarma-image-id="184643"></figure></section><p style="text-align: center;"><em>Source: CGS Research, Company data, SET</em></p></section>

Crude: Bright E&amp;P business performance from recovering crude priceWe expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021.  PTTEP is our top pick, the E&amp;P business will most benefit from recovering crude price.Refinery: Improving product demand to drive GRMThai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). TOP is our top pick among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).Petrochemicals: Benefit from global recoveryWe foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). PTTGC is our top pick as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.Valuation Summary*
Source: CGS Research, Company data, SET

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

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)

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

PTTEP: Oman Block 61 Gas Project to Be New Growth Driver

Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume...

Pi Securities PCL, Thailand

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

Energy Sector : Overweight- Oil demand recovery to drive 2021 earnings. We expect bright E&P business performance from recovering crude price, and...

Pi Securities PCL, Thailand

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