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 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

<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

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>The June 2024 index changes for Thailand's SET 50 index were announced after market close yesterday (17th June 2024).</li>
<li>Initially we <a href="https://www.smartkarma.com/insights/quiddity-leaderboard-set50-jun-24-3-changes-likely-banpu-still-not-safe-from-deletion" target="_blank" rel="noopener">expected only three changes</a> but after the index methodology was revised in May 2024, we <a href="https://www.smartkarma.com/insights/quiddity-leaderboard-set50-jun-24-banpu-vs-sawad-has-to-be-monitored-closely" target="_blank" rel="noopener">revised our expectations</a> and we had 4 expected ADDs/DELs.</li>
<li>All 4 expected ADDs/DELs turned out to correct. In this insight, we take a look at our estimation of expected flows and potential trade ideas based on the flow dynamics.</li>
</ul>


The June 2024 index changes for Thailand's SET 50 index were announced after market close yesterday (17th June 2024).
Initially we expected only three changes but after the index methodology was revised in May 2024, we revised our expectations and we had 4 expected ADDs/DELs.
All 4 expected ADDs/DELs turned out to correct. In this insight, we take a look at our estimation of expected flows and potential trade ideas based on the flow dynamics.


Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month

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 - 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

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

Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month

Our sector-neutral trade ideas have generated a long-short return of 5.2% in a month which was significantly better than being LONG 4 Expected ADDs...

Janaghan Jeyakumar, CFA

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