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.

Equity Bottom-Up

<ul><li>We expect the 3Q24E earnings to turn to a loss, primarily due to sustained low gross refining margins (GRM) and stock losses.</li><li>We have revised down our GRM assumptions and profit forecasts for 2024-26E.</li><li>The 2024E profit is anticipated to decline YoY, but we expect an upward trend in 2025-26E, with a projected 28% CAGR driven by new contributions from the Clean Fuel Project (CFP), which is expected to reach full commercial production in 2H25E based on our conservative assumptions. </li></ul>

We expect the 3Q24E earnings to turn to a loss, primarily due to sustained low gross refining margins (GRM) and stock losses.We have revised down our GRM assumptions and profit forecasts for 2024-26E.The 2024E profit is anticipated to decline YoY, but we expect an upward trend in 2025-26E, with a projected 28% CAGR driven by new contributions from the Clean Fuel Project (CFP), which is expected to reach full commercial production in 2H25E based on our conservative assumptions. 

Thai Oil - 3Q24E Earnings to Turn to a Loss; Revise Down GRM/Earnings

Thematic (Sector/Industry)

<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 expect the energy sector to deliver a mixed performance in 3Q24E.</li>
<li>We maintain a Neutral investment rating on the sector, reflecting weak industry indicators in 2H24E (e.g., oil prices, refining margins, marketing margins).</li>
<li>In addition, we downgrade our recommendation for refinery stocks (BCP and TOP) to Outperform (from Buy) due to tactical factors, as their share prices have risen in line with improving refining margins. </li>
</ul>


We expect the energy sector to deliver a mixed performance in 3Q24E.
We maintain a Neutral investment rating on the sector, reflecting weak industry indicators in 2H24E (e.g., oil prices, refining margins, marketing margins).
In addition, we downgrade our recommendation for refinery stocks (BCP and TOP) to Outperform (from Buy) due to tactical factors, as their share prices have risen in line with improving refining margins. 


Industry Update - Energy (Upstream-Downstream)

<ul><li>The stock price is exposed to limited downside risk and has already priced in the weak GRM and core profit in 2Q24 to a certain degree.</li><li>Meanwhile, the GRM, based on the Singapore GRM, in 3Q24 QTD has recovered (to USD4.6/bbl vs. USD3.5 in 2Q24).</li><li>TOP’s current valuation is attractive. The commercial kick-off of the Clean Fuel Project (CFP) in 2025E, which is expected to generate an incremental GRM, will bolster the strong long-term earnings outlook (expected 2Y EPS growth at a 15% CAGR). </li></ul>

The stock price is exposed to limited downside risk and has already priced in the weak GRM and core profit in 2Q24 to a certain degree.Meanwhile, the GRM, based on the Singapore GRM, in 3Q24 QTD has recovered (to USD4.6/bbl vs. USD3.5 in 2Q24).TOP’s current valuation is attractive. The commercial kick-off of the Clean Fuel Project (CFP) in 2025E, which is expected to generate an incremental GRM, will bolster the strong long-term earnings outlook (expected 2Y EPS growth at a 15% CAGR). 

Thai Oil - Weak 2Q24 Core Profit, but NP Cushioned by a Stock Gain and an Extra Gain

<ul><li>The stock price is exposed to limited downside risk and already priced in the weak GRM and core profit in 2Q24E to a certain degree.</li><li>The current market price is trading at an equity risk premium (ERP) higher than the 90-day moving average, which is in line with the current valuation indicating that the stock is attractive, with upside of approximately 15% from the 12M FV of Bt61.65, based on a required return of 13.1%.</li><li>Meanwhile, the commercial kick-off of the Clean Fuel Project (CFP) in 2025E, which is expected to generate an incremental GRM, reaffirms our view of a strong long-term earnings outlook (expected 2024-26E EPS growth at a 15% CAGR). </li></ul>

The stock price is exposed to limited downside risk and already priced in the weak GRM and core profit in 2Q24E to a certain degree.The current market price is trading at an equity risk premium (ERP) higher than the 90-day moving average, which is in line with the current valuation indicating that the stock is attractive, with upside of approximately 15% from the 12M FV of Bt61.65, based on a required return of 13.1%.Meanwhile, the commercial kick-off of the Clean Fuel Project (CFP) in 2025E, which is expected to generate an incremental GRM, reaffirms our view of a strong long-term earnings outlook (expected 2024-26E EPS growth at a 15% CAGR). 

Thai Oil - Weak 2Q24E Core Profit but Cushioned by Stock Gains and Extra Gains

Thailand

Thai Oil Public Company Limited is an oil refinery company. The Company imports crude oil and refines it into gasoline.  It also produces oil related products including liquefied petroleum gas (LPG), kerosene, fuel oil and chemicals. Thai oil supplies its products to domestic market where its major customers include Shell, Caltex Oil and the Petroleum Authority of Thailand.

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Thai Oil Pcl (TOP TB)

Thai Oil - 3Q24E Earnings to Turn to a Loss; Revise Down GRM/Earnings

We expect the 3Q24E earnings to turn to a loss, primarily due to sustained low gross refining margins (GRM) and stock losses.

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

Industry Update - Energy (Upstream-Downstream)

We maintain a Neutral investment rating on the sector, reflecting weak industry indicators in 2H24E (e.g., oil prices, refining margins, marketing...

Krungthai XSpring

Thai Oil - Weak 2Q24 Core Profit, but NP Cushioned by a Stock Gain and an Extra Gain

The stock price is exposed to limited downside risk and has already priced in the weak GRM and core profit in 2Q24 to a certain degree.

Krungthai XSpring

Thai Oil - Weak 2Q24E Core Profit but Cushioned by Stock Gains and Extra Gains

The stock price is exposed to limited downside risk and already priced in the weak GRM and core profit in 2Q24E to a certain degree.

Krungthai XSpring

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