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>BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of Bt668mn.</li><li>Excluding the FX impact, the firm reported a core profit of Bt855mn (+184% YoY, +157% QoQ) in 2Q23.</li><li>The positive factors included the wider margin of electricity sold to industrial users (IU) to Bt1.42/unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1.549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu (-4% YoY, -16% QoQ) amid a slight decline in electricity sold to IU by 3% YoY and 2% QoQ to 834GWh; 2) larger electricity volume sold to EGAT by 7% QoQ to 2,270GWh on the full- quarter contribution of BGPM2R (SPP replacement; COD in March 2023); and 3) larger steam sales volume to IU of 219k tons (+14% YoY, +12% QoQ), offsetting the lower steam price by 7% QoQ in line with the gas price.</li></ul>

BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of Bt668mn.Excluding the FX impact, the firm reported a core profit of Bt855mn (+184% YoY, +157% QoQ) in 2Q23.The positive factors included the wider margin of electricity sold to industrial users (IU) to Bt1.42/unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1.549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu (-4% YoY, -16% QoQ) amid a slight decline in electricity sold to IU by 3% YoY and 2% QoQ to 834GWh; 2) larger electricity volume sold to EGAT by 7% QoQ to 2,270GWh on the full- quarter contribution of BGPM2R (SPP replacement; COD in March 2023); and 3) larger steam sales volume to IU of 219k tons (+14% YoY, +12% QoQ), offsetting the lower steam price by 7% QoQ in line with the gas price.

Earnings Review - B.Grimm Power Plc. (BGRIM)

<div><div><div><div><ul><li>We expect BGRIM to report a 2Q23E net profit of Bt668mn, reversing from the net loss of Bt193mn in 2Q22 and up 68% QoQ.</li><li>The growth catalysts include 1) the wider margin of electricity sold to industrial users (IU) to Bt1 . 5 /unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1 .549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu ( -4% YoY, -16% QoQ); 2) larger electricity volume sold to EGAT by 7% QoQ on the full-quarter contribution of BGPM2R (SPP replacement; COD in March 2023); 3) larger steam sales volume to IU of 218k tons (+13% YoY, +12% QoQ), offsetting the lower steam price.</li><li>Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by effective management of financial activities, resulting in lower finance costs to a similar extent.</li></ul></div></div></div></div>

We expect BGRIM to report a 2Q23E net profit of Bt668mn, reversing from the net loss of Bt193mn in 2Q22 and up 68% QoQ.The growth catalysts include 1) the wider margin of electricity sold to industrial users (IU) to Bt1 . 5 /unit (vs. Bt0.25/unit in 2Q22 and Bt1.32/unit in 1Q23), in line with the trajectory of Ft (note that the Ft from May to August 2023 is Bt0.9127/unit, +Bt0.665/unit from the same period last year at Bt0.2477/unit but -Bt0.6365/unit from Bt1 .549/unit in January to April 2023), as well as lower gas costs to Bt404/mmbtu ( -4% YoY, -16% QoQ); 2) larger electricity volume sold to EGAT by 7% QoQ on the full-quarter contribution of BGPM2R (SPP replacement; COD in March 2023); 3) larger steam sales volume to IU of 218k tons (+13% YoY, +12% QoQ), offsetting the lower steam price.Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by effective management of financial activities, resulting in lower finance costs to a similar extent.

B.grimm Power (Bgrim) - Earnings Improvement to Continue in 2Q23E

Cross Asset Strategy

<ul><li>SPPs’ share prices may experience selling pressure in the short term due to three cases concerning electricity tariffs and Ft rates during the final period, as public hearings indicate a high likelihood of government intervention amid the current economic fragility.</li><li>If the electricity tariff and Ft rate in the final period are capped, there will be no downside risk to our 2024E forecasts.</li><li>However, if the electricity tariff and Ft price fall under Case (3), this could present upside risk to our 2024E earnings projections for BGRIM and GPSC, by around 6%. </li></ul>

SPPs’ share prices may experience selling pressure in the short term due to three cases concerning electricity tariffs and Ft rates during the final period, as public hearings indicate a high likelihood of government intervention amid the current economic fragility.If the electricity tariff and Ft rate in the final period are capped, there will be no downside risk to our 2024E forecasts.However, if the electricity tariff and Ft price fall under Case (3), this could present upside risk to our 2024E earnings projections for BGRIM and GPSC, by around 6%. 

Thematic (Sector/Industry)

<ul><li>Negative surrounding factors pressured the share prices of the power sector last week.</li><li>Meanwhile, our key assumptions for 2024E, including SPP gas prices and the electricity sales volume of IUs, have been maintained.</li><li>The valuation metrics suggest that SPP operators’ current valuations are attractive and that the downside risk is very limited, with the equity risk premiums (ERP) higher than the 90-day rolling average. </li></ul>

Negative surrounding factors pressured the share prices of the power sector last week.Meanwhile, our key assumptions for 2024E, including SPP gas prices and the electricity sales volume of IUs, have been maintained.The valuation metrics suggest that SPP operators’ current valuations are attractive and that the downside risk is very limited, with the equity risk premiums (ERP) higher than the 90-day rolling average. 

Industry Update - Energy (Power) - JUNE 17, 2024

<ul><li>The share prices of the power sector may face pressure from the extended high-interest rate cycle, posing downside risk to expected project returns.</li><li>However, the current share prices have largely factored in this element, making the present valuation more attractive.</li><li>Meanwhile, the 2024-26E earnings growth of the power operators under our coverage remains solid. </li></ul>

The share prices of the power sector may face pressure from the extended high-interest rate cycle, posing downside risk to expected project returns.However, the current share prices have largely factored in this element, making the present valuation more attractive.Meanwhile, the 2024-26E earnings growth of the power operators under our coverage remains solid. 

Thailand

B.Grimm Power Public Company Limited operates as a renewable energy company. The Company focuses on the development, financing, construction, and operation of green field power plants. B.Grimm Power also renders electricity distribution, operations, and maintenance services. B.Grimm Power serves clients in Asia.

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B Grimm Power (BGRIM TB)

Earnings Review - B.Grimm Power Plc. (BGRIM)

BGRIM reported a 2Q23 net profit of Bt678mn, reversing from the net loss of Bt193mn in 2Q22 and expanding 70% QoQ, in line with our projection of...

Krungthai XSpring

B.grimm Power (Bgrim) - Earnings Improvement to Continue in 2Q23E

Meanwhile, the depreciation of the USD is likely to have led to an FX loss of around Bt168mn in the quarter, with the net impact cushioned by...

Krungthai XSpring

Industry Update - Energy (Power)

SPPs’ share prices may experience selling pressure in the short term due to three cases concerning electricity tariffs and Ft rates during the...

Krungthai XSpring

Industry Update - Energy (Power) - JUNE 17, 2024

Headwinds from inflated share prices; cheap valuation, limited downside. Negative surrounding factors pressured the share prices of the power...

Krungthai XSpring

Energy (Power) - MAY 30, 2024

The share prices of the power sector may face pressure from the extended high-interest rate cycle, posing downside risk to expected project returns.

Krungthai XSpring

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