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 4Q24E earnings to have improved QoQ, supported by a better market GIM, with negligible stock impacts.</li><li>However, the 2024E net profit is likely to decline YoY, in line with the lower market GIM and stock losses.</li><li>We maintain our 2025-26E earnings forecasts, projecting 2-year core EPS growth at a -21% CAGR, which underperforms the sector.</li></ul>

We expect the 4Q24E earnings to have improved QoQ, supported by a better market GIM, with negligible stock impacts.However, the 2024E net profit is likely to decline YoY, in line with the lower market GIM and stock losses.We maintain our 2025-26E earnings forecasts, projecting 2-year core EPS growth at a -21% CAGR, which underperforms the sector.

Thai Oil  - 4Q24E Earnings to Have Improved QoQ; CFP the Overhang

<ul><li>The risks associated with the CFP are higher than previously expected (e.g., significant cost overruns, COD delayed by three years, risks regarding remaining construction, and the funding plan).</li><li>TOP’s share price is trading at a higher-than-usual ERP to compensate for these risks.</li><li>We have revised down our 2025-26E profit forecasts by 24-28% due to higher interest expenses from a bond issuance and/or borrowings, resulting in negative 2-year core EPS growth (-20% CAGR) that underperforms the sector. </li></ul>

The risks associated with the CFP are higher than previously expected (e.g., significant cost overruns, COD delayed by three years, risks regarding remaining construction, and the funding plan).TOP’s share price is trading at a higher-than-usual ERP to compensate for these risks.We have revised down our 2025-26E profit forecasts by 24-28% due to higher interest expenses from a bond issuance and/or borrowings, resulting in negative 2-year core EPS growth (-20% CAGR) that underperforms the sector. 

Thai Oil - The CFP Entails Higher than Previously Expected Risks

<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

Thailand

Thai Oil is an integrated energy company engaged in oil refining and petrochemicals, producing a diverse range of products including refined fuels, petrochemicals, and base lubricating oils. It operates one of the leading complex refineries in Asia Pacific with a current capacity of 275,000 barrels per day. The company was founded in 1961 and is headquartered in Bangkok, Thailand.

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Thai Oil (TOP-R TB)

Thai Oil - 4Q24E Earnings to Have Improved QoQ; CFP the Overhang

We expect the 4Q24E earnings to have improved QoQ, supported by a better market GIM, with negligible stock impacts. However, the 2024E net profit...

Krungthai XSpring

Thai Oil - The CFP Entails Higher than Previously Expected Risks

The risks associated with the CFP are higher than previously expected (e.g., significant cost overruns, COD delayed by three years, risks regarding...

Krungthai XSpring

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

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