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>The decline in refining margins YoY (weak in 2Q-3Q24 and beginning to recover in 4Q24 QTD) and the risk of a delay in the COD of the Clean Fuel Project (CFP) have pressured the stock price to fall by 24% over the past three months and around 17% in the past month, primarily due to the latter factor.</li><li>We have revised down our 2025- 26E earnings estimates to reflect the risk of the CFP’s COD being delayed to beyond 2026E (COD previously expected in 2H25E), resulting in a new fair value (FV) of Bt44.0 (vs. Bt54.82 earlier).</li><li>We have also downgraded our rating to Neutral (from Outperform). </li></ul>

The decline in refining margins YoY (weak in 2Q-3Q24 and beginning to recover in 4Q24 QTD) and the risk of a delay in the COD of the Clean Fuel Project (CFP) have pressured the stock price to fall by 24% over the past three months and around 17% in the past month, primarily due to the latter factor.We have revised down our 2025- 26E earnings estimates to reflect the risk of the CFP’s COD being delayed to beyond 2026E (COD previously expected in 2H25E), resulting in a new fair value (FV) of Bt44.0 (vs. Bt54.82 earlier).We have also downgraded our rating to Neutral (from Outperform). 

Thai Oil - Earnings and FV Revised Down to Reflect Risks of Delayed COD of CFP

<ul><li>The stock price has declined further by 20% YTD and is trading at an equity risk premium (ERP) higher than the 90-day average, largely reflecting the risk from delays in the Clean Fuel Project (CFP) and the downward adjustment in the base of the refining margin (which was very weak in 2Q-3Q24).</li><li>Therefore, the current market price, trading at a discount to the fair value (FV) of Bt54.82, makes the current valuation attractive.</li><li>The 3Q24 earnings turned to a loss, as expected (due to sustained low refining margins and stock losses).</li></ul>

The stock price has declined further by 20% YTD and is trading at an equity risk premium (ERP) higher than the 90-day average, largely reflecting the risk from delays in the Clean Fuel Project (CFP) and the downward adjustment in the base of the refining margin (which was very weak in 2Q-3Q24).Therefore, the current market price, trading at a discount to the fair value (FV) of Bt54.82, makes the current valuation attractive.The 3Q24 earnings turned to a loss, as expected (due to sustained low refining margins and stock losses).

Thai Oil - 3Q24 Turned to a Loss as Expected; Negatives Largely Priced In

<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)

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.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Thai Oil Pcl (TOP TB)

Thai Oil - Earnings and FV Revised Down to Reflect Risks of Delayed COD of CFP

While the market price appears cheap relative to the FV, we do not anticipate any positive catalysts for the stock until there is a clear...

Krungthai XSpring

Thai Oil - 3Q24 Turned to a Loss as Expected; Negatives Largely Priced In

The stock price has declined further by 20% YTD and is trading at an equity risk premium (ERP) higher than the 90-day average, largely reflecting...

Krungthai XSpring

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)