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>We maintain a Neutral rating on the energy sector due to external factors, including Trump 2.0 policies, the US-China trade war, and risks from domestic government policies related to energy pricing that may pose downside risk to the 2025-26E earnings forecasts.</li><li>However, downside risks for SET ENERGY appear more limited as the implied EPS has declined near its average level, indicating that market expectations for EPS have adjusted closer to the consensus.</li><li>We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. </li></ul>

We maintain a Neutral rating on the energy sector due to external factors, including Trump 2.0 policies, the US-China trade war, and risks from domestic government policies related to energy pricing that may pose downside risk to the 2025-26E earnings forecasts.However, downside risks for SET ENERGY appear more limited as the implied EPS has declined near its average level, indicating that market expectations for EPS have adjusted closer to the consensus.We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. 

Energy (Upstream-Downstream) - DECEMBER 17, 2024

Equity Bottom-Up

Star Petroleum Refining / Equity Bottom-Up

<ul><li>3Q24 earnings turned to a loss (due to stock losses and LCM), but the loss was larger than expected due to higher-than-anticipated operating expenses (Opex).</li><li>Consequently, we have revised down our net profit estimates for 2024-26E by 9-15%.</li><li>Our new projections call for slow profit growth over the next two years at a 4% CAGR.</li></ul>

3Q24 earnings turned to a loss (due to stock losses and LCM), but the loss was larger than expected due to higher-than-anticipated operating expenses (Opex).Consequently, we have revised down our net profit estimates for 2024-26E by 9-15%.Our new projections call for slow profit growth over the next two years at a 4% CAGR.

Star Petroleum Refining - 3Q24 Earnings Tuned to a Loss (Given Stock Losses, LCM)

<ul><li>We expect the 3Q24E performance to turn to a loss (but we maintain our 2024E net profit forecast), with refining margins to be lower YoY and a limited recovery in 2H24E.</li><li>These factors have largely been priced in, aligning with the limited downside risk from a tactical view.</li><li>However, given the restricted upside gain of 4.8% and the moderate profit growth outlook for 2025-26E of around a 6% CAGR, we have downgraded our rating to Neutral (from Outperform), with a 12M FV of Bt7.18 (from Bt7.26 previously), based on the earnings yield method with a required return of 12.7%.</li></ul>

We expect the 3Q24E performance to turn to a loss (but we maintain our 2024E net profit forecast), with refining margins to be lower YoY and a limited recovery in 2H24E.These factors have largely been priced in, aligning with the limited downside risk from a tactical view.However, given the restricted upside gain of 4.8% and the moderate profit growth outlook for 2025-26E of around a 6% CAGR, we have downgraded our rating to Neutral (from Outperform), with a 12M FV of Bt7.18 (from Bt7.26 previously), based on the earnings yield method with a required return of 12.7%.

Star Petroleum Refining - 3Q24E Earnings to Turn to a Loss Due to Stock Losses and LCM

<ul><li>We have revised down our Dubai crude oil price assumptions for 2024-26E to USD80, USD75, and USD73/bbl, respectively.</li><li>The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to negatively impact PTTEP, as approximately 30% of its sales volume is exposed to crude oil prices, and the stock shows a high correlation of around 0.8 with crude oil prices.</li><li>For the refinery sector, we anticipate short-term negative effects, likely due to inventory losses in 3Q24E from the sharp decline in crude oil prices, against a neutral impact in the medium term given declining crude oil costs and crude premiums. </li></ul>

We have revised down our Dubai crude oil price assumptions for 2024-26E to USD80, USD75, and USD73/bbl, respectively.The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to negatively impact PTTEP, as approximately 30% of its sales volume is exposed to crude oil prices, and the stock shows a high correlation of around 0.8 with crude oil prices.For the refinery sector, we anticipate short-term negative effects, likely due to inventory losses in 3Q24E from the sharp decline in crude oil prices, against a neutral impact in the medium term given declining crude oil costs and crude premiums. 

Industry Update: Energy (Oil) - SEPTEMBER 30, 2024

<ul><li>We initiate our coverage on SPRC with an Outperform rating and a 12M fair value (FV) of Bt7.26, based on a required return of 12.1%.</li><li>The stock price has dropped significantly by 26% over the past six months (compared to BSRC at -24% with a high gasoline yield, TOP at -14%, and BCP at -16% with a high diesel yield).</li><li>This reflects the weak performance in 2Q24 and the potential losses in 3Q24E, primarily due to stock losses.</li></ul>

We initiate our coverage on SPRC with an Outperform rating and a 12M fair value (FV) of Bt7.26, based on a required return of 12.1%.The stock price has dropped significantly by 26% over the past six months (compared to BSRC at -24% with a high gasoline yield, TOP at -14%, and BCP at -16% with a high diesel yield).This reflects the weak performance in 2Q24 and the potential losses in 3Q24E, primarily due to stock losses.

Star Petroleum Refining - Negatives Priced In; Steady Core Earnings Growth

Thailand

Star Petroleum Refining PCL offers  petroleum products both for domestic consumption and for export and operates a crude oil refinery. Star Petroleum Refining operates in Thailand.

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Star Petroleum Refining (SPRC TB)

Energy (Upstream-Downstream) - DECEMBER 17, 2024

We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. Our top pick remains BCP (Outperform; FV at...

Krungthai XSpring

Star Petroleum Refining - 3Q24 Earnings Tuned to a Loss (Given Stock Losses, LCM)

3Q24 earnings turned to a loss (due to stock losses and LCM), but the loss was larger than expected due to higher-than-anticipated operating...

Krungthai XSpring

Star Petroleum Refining - 3Q24E Earnings to Turn to a Loss Due to Stock Losses and LCM

We expect the 3Q24E performance to turn to a loss (but we maintain our 2024E net profit forecast), with refining margins to be lower YoY and a...

Krungthai XSpring

Industry Update: Energy (Oil) - SEPTEMBER 30, 2024

The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to...

Krungthai XSpring

Star Petroleum Refining - Negatives Priced In; Steady Core Earnings Growth

We initiate our coverage on SPRC with an Outperform rating and a 12M fair value (FV) of Bt7.26, based on a required return of 12.1%.

Krungthai XSpring

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