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

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Thai Equity - Bottom-up - Equities

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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>Last week analyst meeting came out in a positive tone, given the healthy crude oil price will place average selling price at high levels and push 4Q21-2022 earnings. We maintain the BUY rating based on a target price of Bt146.00, derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.</strong></p><div>• Expect 4Q21 core profit to improve YoY and QOQ backed by higher sale volume (+12% YoY, +2% QoQ) and average selling price (+21% YoY, +3% QoQ).</div><div></div><div>• Positive 2022 earnings outlook as the sales volume is expected to increase by +18% YoY to 486kBOED, and ASP by 7% to US$45/BOE.</div><div></div><div>• Minimal impact from G1/61 Erawan transition to 2022 sales volume, as the short fall will be compensated by increasing production from Bongkot and Arthit projects.</div>

Last week analyst meeting came out in a positive tone, given the healthy crude oil price will place average selling price at high levels and push 4Q21-2022 earnings. We maintain the BUY rating based on a target price of Bt146.00, derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.• Expect 4Q21 core profit to improve YoY and QOQ backed by higher sale volume (+12% YoY, +2% QoQ) and average selling price (+21% YoY, +3% QoQ).• Positive 2022 earnings outlook as the sales volume is expected to increase by +18% YoY to 486kBOED, and ASP by 7% to US$45/BOE.• Minimal impact from G1/61 Erawan transition to 2022 sales volume, as the short fall will be compensated by increasing production from Bongkot and Arthit projects.

PTTEP: High Crude Oil Price to Support 4Q21-2022 Earnings Momentum

<p><strong>PTTEP reported 3Q21 net profit of Bt9.5bn (+33%YoY, +34%QoQ). The earnings came out inline with our expectation.</strong></p><p>• Excluding extraordinary items (FX, oil hedging etc. ) the recurring net profit stood at Bt11.0bn  (+79% YoY, -2% QoQ), The 9M21 recurring profit accounted to 71% of our full year forecast.</p><p>• The significant YoY earnings growth was driven by higher sales volume, average selling price, and decrease in unit cost. While slightly softened QoQ due to 6% drop in sales volume, which was partially offset by 5% increase in average selling price.</p><p>• Expect 4Q21 recurring net profit to remain flat QoQ, while improve YoY backed by higher average selling price and sales volume.</p><p><strong>We maintain the BUY rating with a target price of Bt146.00, derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22. Our valuation reflects the positive earnings outlook for 2022 from growing sales volume, as well as rising crude oil and gas prices.</strong></p>

PTTEP reported 3Q21 net profit of Bt9.5bn (+33%YoY, +34%QoQ). The earnings came out inline with our expectation.• Excluding extraordinary items (FX, oil hedging etc. ) the recurring net profit stood at Bt11.0bn  (+79% YoY, -2% QoQ), The 9M21 recurring profit accounted to 71% of our full year forecast.• The significant YoY earnings growth was driven by higher sales volume, average selling price, and decrease in unit cost. While slightly softened QoQ due to 6% drop in sales volume, which was partially offset by 5% increase in average selling price.• Expect 4Q21 recurring net profit to remain flat QoQ, while improve YoY backed by higher average selling price and sales volume.We maintain the BUY rating with a target price of Bt146.00, derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22. Our valuation reflects the positive earnings outlook for 2022 from growing sales volume, as well as rising crude oil and gas prices.

PTTEP: Healthy Selling Price and Sales Volume Drove 3Q21 Earnings

<p><strong>We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ).</strong></p><div>• The YoY surge will be from 20% and 13% growth in sales volume and  average product selling price (ASP) respectively.</div><div></div><div>• While QoQ growth will be due to lower hedging loss of US$40m expected in 3Q, compared a US$127m loss incurred in 2Q.</div><div></div><div>• The sales volume is expected to drop QoQ in 3Q21 due to lower nomination from PTT, while ASP should improve following the crude oil price rally. The reference Dubai crude oil price surged to US$72/bbl in 3Q21 (+67% YoY, +7% QoQ)</div><div></div><div>• Bright 4Q21 earnings outlook backed by growing sales volume, and solid average selling price as crude oil price is expected to continue the rally.</div><div></div><div><strong>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 PE’22.</strong></div>

We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ).• The YoY surge will be from 20% and 13% growth in sales volume and  average product selling price (ASP) respectively.• While QoQ growth will be due to lower hedging loss of US$40m expected in 3Q, compared a US$127m loss incurred in 2Q.• The sales volume is expected to drop QoQ in 3Q21 due to lower nomination from PTT, while ASP should improve following the crude oil price rally. The reference Dubai crude oil price surged to US$72/bbl in 3Q21 (+67% YoY, +7% QoQ)• Bright 4Q21 earnings outlook backed by growing sales volume, and solid average selling price as crude oil price is expected to continue the rally.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 PE’22.

PTTEP: Solid Product Prices to Drive 3Q21 Earnings

<p><strong>Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY rating given the narrow impact to our 2021 earnings forecast and bright 4Q21-2022 outlook. Our target price of Bt146.00 is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.</strong></p><div>• Expect 3Q21 recurring net profit to improve YoY backed by higher sale volume (+18% YoY) and average selling price (+10% YoY), while soften QoQ due to drop in volume sales (-9% QoQ) dragged by lower nomination from PTT (because of gas separation plant shutdown).</div><div></div><div>• Positive 2021-22 earnings outlook as the sales volume will increase by +16% YoY to 412kBOED in 2021 and 486kBOED in 2022 (+18% YoY).</div><div></div><div>• PTTEP targets to expand its production to 700kBOED by 2030 (+6% CAGR from 2021 level) to maintain steady long-term growth. The company also plans  to achieve 20% of net income contribution from non-E&amp;P business (ARV, Power and CCU) by 2030.</div>

Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY rating given the narrow impact to our 2021 earnings forecast and bright 4Q21-2022 outlook. Our target price of Bt146.00 is derived using DCF methodology (WACC 9.4%, TG 2%), implying 11x PE’22.• Expect 3Q21 recurring net profit to improve YoY backed by higher sale volume (+18% YoY) and average selling price (+10% YoY), while soften QoQ due to drop in volume sales (-9% QoQ) dragged by lower nomination from PTT (because of gas separation plant shutdown).• Positive 2021-22 earnings outlook as the sales volume will increase by +16% YoY to 412kBOED in 2021 and 486kBOED in 2022 (+18% YoY).• PTTEP targets to expand its production to 700kBOED by 2030 (+6% CAGR from 2021 level) to maintain steady long-term growth. The company also plans  to achieve 20% of net income contribution from non-E&amp;P business (ARV, Power and CCU) by 2030.

PTTEP: Temporary Weak 3Q21 Operation Due to Lower Gas Nomination

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 ,




Thailand

PTT Exploration and Production Public Company Limited explores for crude oil and natural gas, develops fields for production, and produces oil and natural gas. The Company is a subsidiary of the Petroleum Authority of Thailand.

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PTT E&P (PTTEP TB)

PTTEP: High Crude Oil Price to Support 4Q21-2022 Earnings Momentum

Last week analyst meeting came out in a positive tone, given the healthy crude oil price will place average selling price at high levels and push...

Pi Securities PCL, Thailand

PTTEP: Healthy Selling Price and Sales Volume Drove 3Q21 Earnings

PTTEP reported 3Q21 net profit of Bt9.5bn (+33%YoY, +34%QoQ). The earnings came out inline with our expectation. We maintain the BUY rating with a...

Pi Securities PCL, Thailand

PTTEP: Solid Product Prices to Drive 3Q21 Earnings

We expect PTTEP to post a solid 3Q21 net profit of Bt10.1bn (+40% YoY, +41% QoQ). We maintain the BUY recommendation based on a target price of...

Pi Securities PCL, Thailand

PTTEP: Temporary Weak 3Q21 Operation Due to Lower Gas Nomination

Last week analyst meeting came out in a slight negative tone considering the weak sales performance outlook for 3Q21. However, we maintain our BUY...

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

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