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

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

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

Equity Bottom-Up

<p><strong>Yesterday analyst meeting came out with a neutral outlook for 2H21 refinery business. The GIM should remain stable in 3Q-4Q21 and improve 1H22 onwards.</strong></p><div> •Expect 3Q21 operating profit to remain healthy (flat QoQ, recovering from loss YoY). The gradual recovery in refinery business should be offset by declining spread of Aromatics, LAB and Lube base segments in 2H21.</div><div></div><div>• We expect the GRM slightly improve in 3Q-4Q21 on the back of resuming product demand mainly gasoline and diesel in Asia after easing of lockdown measures. However, this will be dragged by rising crude premium.</div><div></div><div><strong>We maintain our target price of Bt50.0 while downgrade the recommendation to HOLD due to limited upside from current share price. Our target price is pegged to 0.8x 1.1xPBV,21E, which is which is equivalent to       -1SD of 3-year trading average.</strong></div>

Yesterday analyst meeting came out with a neutral outlook for 2H21 refinery business. The GIM should remain stable in 3Q-4Q21 and improve 1H22 onwards. •Expect 3Q21 operating profit to remain healthy (flat QoQ, recovering from loss YoY). The gradual recovery in refinery business should be offset by declining spread of Aromatics, LAB and Lube base segments in 2H21.• We expect the GRM slightly improve in 3Q-4Q21 on the back of resuming product demand mainly gasoline and diesel in Asia after easing of lockdown measures. However, this will be dragged by rising crude premium.We maintain our target price of Bt50.0 while downgrade the recommendation to HOLD due to limited upside from current share price. Our target price is pegged to 0.8x 1.1xPBV,21E, which is which is equivalent to       -1SD of 3-year trading average.

TOP: Neutral Refinery and Weak Aromatics Outlook for 2H21

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.

<p>TOP’s refinery remains the challenge to its earnings given the slow recovery of the refinery market amid concern over the spread of the Delta variant. We expect its strategic move into the olefins value chain via a 15.38% direct investment in PT Chandra Asri Petrochemical Tbk (CAP) to make a negligible incremental contribution in the early years, while there will be a possible 12% dilution effect from the company’s planned capital increase (likely in 2Q22E) until the kick-off of the new petrochemical plant expansion (CAP2) in 2026E. We maintain a Hold rating.</p>

TOP’s refinery remains the challenge to its earnings given the slow recovery of the refinery market amid concern over the spread of the Delta variant. We expect its strategic move into the olefins value chain via a 15.38% direct investment in PT Chandra Asri Petrochemical Tbk (CAP) to make a negligible incremental contribution in the early years, while there will be a possible 12% dilution effect from the company’s planned capital increase (likely in 2Q22E) until the kick-off of the new petrochemical plant expansion (CAP2) in 2026E. We maintain a Hold rating.

<p><strong>We have long term positive outlook on TOP’s new investment in Chandra Asri given the value accretion from entry to high value olefins business chain, financial and synergy benefits. </strong></p><div>• TOP announced acquisition of 15.38% stake in Chandra Asri Petrochemical (CAP) with Bt39.1bn investment. Phase 1 (15% stake) transaction will be competed by 3Q21, and Phase 2 (0.38% stake) by 1H22.</div><div></div><div>• The investment will be funded by capital  raising (Bt10bn), divestment of 10.8% stake in GPSC (Bt20bn) and remaining from PTT &amp; ST loans</div><div></div><div>• Expect 2Q21 net profit to soften both YoY and QoQ mainly dragged by lower stock gain and FX loss. The GIM should remain stable QoQ in 2Q21, the lower GRM is expected to offset by improved aromatics and LAB spread.</div><div></div><div>We maintain the BUY rating while revise down the target price by 23% to Bt50.0 considering short term negative sentiments from capital raising and weak GRM outlook for 2H21. Our target price is pegged to 0.8xPBV,22E, equivalent to  -1SD of 3-year trading average.</div>

We have long term positive outlook on TOP’s new investment in Chandra Asri given the value accretion from entry to high value olefins business chain, financial and synergy benefits. • TOP announced acquisition of 15.38% stake in Chandra Asri Petrochemical (CAP) with Bt39.1bn investment. Phase 1 (15% stake) transaction will be competed by 3Q21, and Phase 2 (0.38% stake) by 1H22.• The investment will be funded by capital  raising (Bt10bn), divestment of 10.8% stake in GPSC (Bt20bn) and remaining from PTT &amp; ST loans• Expect 2Q21 net profit to soften both YoY and QoQ mainly dragged by lower stock gain and FX loss. The GIM should remain stable QoQ in 2Q21, the lower GRM is expected to offset by improved aromatics and LAB spread.We maintain the BUY rating while revise down the target price by 23% to Bt50.0 considering short term negative sentiments from capital raising and weak GRM outlook for 2H21. Our target price is pegged to 0.8xPBV,22E, equivalent to  -1SD of 3-year trading average.

TOP: Long Term Positive Outlook on Investment in Chandra Asri

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 ,




<p><strong>Last week analyst meeting came out with a positive outlook for refinery business. GRM tends to gradually recover each quarter in 2Q-2H21 on the back of resumption of gasoline, jet oil, and  diesel demand.</strong></p><div>• Expect 2Q21 recurring net profit to remain healthy (flat QoQ, improving YoY). The GIM should remain stable in 2Q21 and improve in 2H21 as product demand improve after lockdown measures eases in EU &amp; Asia..</div><div></div><div>• Stable oil price outlook and healthy contribution from Aromatics, LAB and Lube base oil would support the earnings momentum in 2H21.</div><div></div><div><strong>We maintain the BUY rating based on a target price of Bt65.0, pegged to 1.1xPBV,21E, which is in line with its world peers and a 10% discount to its Thailand peers.</strong></div>

Last week analyst meeting came out with a positive outlook for refinery business. GRM tends to gradually recover each quarter in 2Q-2H21 on the back of resumption of gasoline, jet oil, and  diesel demand.• Expect 2Q21 recurring net profit to remain healthy (flat QoQ, improving YoY). The GIM should remain stable in 2Q21 and improve in 2H21 as product demand improve after lockdown measures eases in EU &amp; Asia..• Stable oil price outlook and healthy contribution from Aromatics, LAB and Lube base oil would support the earnings momentum in 2H21.We maintain the BUY rating based on a target price of Bt65.0, pegged to 1.1xPBV,21E, which is in line with its world peers and a 10% discount to its Thailand peers.

TOP: Refinery Operations to Gain Momentum in 2H21

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)

TOP: Neutral Refinery and Weak Aromatics Outlook for 2H21

Yesterday analyst meeting came out with a neutral outlook for 2H21 refinery business. The GIM should remain stable in 3Q-4Q21 and improve 1H22...

Pi Securities PCL, Thailand

Earnings Review: Thai Oil Plc.

TOP’s refinery remains the challenge to its earnings given the slow recovery of the refinery market amid concern over the spread of the Delta variant.

Krungthai XSpring

TOP: Long Term Positive Outlook on Investment in Chandra Asri

We have long term positive outlook on TOP’s new investment in Chandra Asri given the value accretion from entry to high value olefins business...

Pi Securities PCL, Thailand

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

TOP: Refinery Operations to Gain Momentum in 2H21

Last week analyst meeting came out with a positive outlook for refinery business. GRM tends to gradually recover each quarter in 2Q-2H21 on the...

Pi Securities PCL, Thailand

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