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

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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

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 ,




Equity Bottom-Up

<p><strong>Analyst meeting last week came out with slight positive tone. Petrochemical outlook seems supportive from demand recovery in 2Q21. The company is also seeking growth opportunity in HVA products via M&amp;A.</strong></p><div>• Overall petrochemical demand in 2Q21 remains solid from economic recovery while supply side was temporarily tight since US polar vortex earlier in 1Q21.</div><div></div><div>• HDPE spread QTD is still increasing to US$644/ton (+10%QoQ) while PP spread maintains at  high level at US$790/ton (flat QoQ).</div><div></div><div>• We expect PTTGC’s earnings to increase QoQ in 2Q21 from i) rising petrochemical spread, ii) new capacity in PO/polyols (YoY growth) and iii) gain on GPSC share disposal.</div><div></div><div><strong>We reiterate our BUY rating with a target price of Bt80.0, derived from 1.2xPBV’21E which is equal to its 5 year average trading.</strong></div>

Analyst meeting last week came out with slight positive tone. Petrochemical outlook seems supportive from demand recovery in 2Q21. The company is also seeking growth opportunity in HVA products via M&amp;A.• Overall petrochemical demand in 2Q21 remains solid from economic recovery while supply side was temporarily tight since US polar vortex earlier in 1Q21.• HDPE spread QTD is still increasing to US$644/ton (+10%QoQ) while PP spread maintains at  high level at US$790/ton (flat QoQ).• We expect PTTGC’s earnings to increase QoQ in 2Q21 from i) rising petrochemical spread, ii) new capacity in PO/polyols (YoY growth) and iii) gain on GPSC share disposal.We reiterate our BUY rating with a target price of Bt80.0, derived from 1.2xPBV’21E which is equal to its 5 year average trading.

PTTGC: Spread Expansion Continues in 2Q21 from Demand Recovery

<p>We reiterate our BUY rating with the new target price at Bt80.0 (from Bt75.0), derived from 1.2xPBV’21E which is equal to its 5 year average trading.</p><div>• PTTGC reported 1Q21 net profit at Bt9.7bn (flipped from loss in 1Q20, +46%QoQ), in-line with consensus.</div><div></div><div>• Core EBITDA jumped to Bt14bn (+122%YoY, +48%QoQ) driven by spread expansion in all products, especially in olefins and performance chemicals (phenol) segment.</div><div></div><div>• We revise up 2021E core earnings by 160% in 2021 to reflect an upward trend in petrochemical spread.</div><div></div><div>• We expect 2Q21 core earnings to grow QoQ on the back of resilient demand in aromatics and tight supply in performance chemicals (phenol). Besides, the company will realize gain on GPSC sales at roughly Bt10bn in 2Q21.</div>

We reiterate our BUY rating with the new target price at Bt80.0 (from Bt75.0), derived from 1.2xPBV’21E which is equal to its 5 year average trading.• PTTGC reported 1Q21 net profit at Bt9.7bn (flipped from loss in 1Q20, +46%QoQ), in-line with consensus.• Core EBITDA jumped to Bt14bn (+122%YoY, +48%QoQ) driven by spread expansion in all products, especially in olefins and performance chemicals (phenol) segment.• We revise up 2021E core earnings by 160% in 2021 to reflect an upward trend in petrochemical spread.• We expect 2Q21 core earnings to grow QoQ on the back of resilient demand in aromatics and tight supply in performance chemicals (phenol). Besides, the company will realize gain on GPSC sales at roughly Bt10bn in 2Q21.

PTTGC: Strong Spread Drives 1Q21 Earnings and Continue in 2Q21

<p><strong>Crude: Bright E&amp;P business performance from recovering crude price</strong></p><ul><li>We expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021. <strong> PTTEP is our top pick</strong>, the E&amp;P business will most benefit from recovering crude price.</li></ul><p><strong>Refinery: Improving product demand to drive GRM</strong></p><ul><li>Thai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). <strong>TOP is our top pick </strong>among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).</li></ul><p><strong>Petrochemicals: Benefit from global recovery</strong></p><ul><li>We foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). <strong>PTTGC is our top pick</strong> as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.</li></ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/642/original/SMK1.png?1611645077" class="editor-image img-responsive" data-smartkarma-image-id="184642"></figure><p style="text-align: center;"><strong>Valuation Summary*</strong></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/643/original/Picture1.jpg?1611645252" class="editor-image img-responsive" data-smartkarma-image-id="184643"></figure></section><p style="text-align: center;"><em>Source: CGS Research, Company data, SET</em></p></section>

Crude: Bright E&amp;P business performance from recovering crude priceWe expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021.  PTTEP is our top pick, the E&amp;P business will most benefit from recovering crude price.Refinery: Improving product demand to drive GRMThai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). TOP is our top pick among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).Petrochemicals: Benefit from global recoveryWe foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). PTTGC is our top pick as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.Valuation Summary*
Source: CGS Research, Company data, SET

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

<p>We reiterate our ‘BUY’ rating with the upgraded target price to Bt75.0 (from Bt56.5), derived from 1.2xPBV’21E which is equal to its 10 year average trading.</p><div>• We expect PTTGC to report a strong earnings momentum in 4Q20 on the back of recovered spread in overall value chain and sales volume growth QoQ.</div><div></div><div>• Besides petrochemical recovery, the company will realize new PO/Polyols capacity in 1Q21 (+10% capacity) and low turnaround during 1H21.</div><div></div><div>• HDPE spread has reversed to its 5-year average at US$592/ton (+100%YoY, +13%QoQ) in 4Q20 and we expect it to remain high during Chinese New Year.</div><div></div><div>• Gasoline and diesel inventory has been falling since 3Q20, supporting GRM recovery in 2021.</div>

We reiterate our ‘BUY’ rating with the upgraded target price to Bt75.0 (from Bt56.5), derived from 1.2xPBV’21E which is equal to its 10 year average trading.• We expect PTTGC to report a strong earnings momentum in 4Q20 on the back of recovered spread in overall value chain and sales volume growth QoQ.• Besides petrochemical recovery, the company will realize new PO/Polyols capacity in 1Q21 (+10% capacity) and low turnaround during 1H21.• HDPE spread has reversed to its 5-year average at US$592/ton (+100%YoY, +13%QoQ) in 4Q20 and we expect it to remain high during Chinese New Year.• Gasoline and diesel inventory has been falling since 3Q20, supporting GRM recovery in 2021.

PTTGC: Expect Strong Recovery in 4Q20 Earnings

Thailand

PTT Global Chemical PCL is a fully integrated petrochemical and chemical company. The Company's products are derived from its main product, Olefins, namely ethylene and propylene.

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PTT Global Chemical (PTTGC TB)

Energy Sector Outlook 3Q21

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Pi Securities PCL, Thailand

PTTGC: Spread Expansion Continues in 2Q21 from Demand Recovery

Analyst meeting last week came out with slight positive tone. Petrochemical outlook seems supportive from demand recovery in 2Q21. The company is...

Pi Securities PCL, Thailand

PTTGC: Strong Spread Drives 1Q21 Earnings and Continue in 2Q21

We reiterate our BUY rating with the new target price at Bt80.0 (from Bt75.0), derived from 1.2xPBV’21E which is equal to its 5 year average trading.

Pi Securities PCL, Thailand

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

Energy Sector : Overweight- Oil demand recovery to drive 2021 earnings. We expect bright E&P business performance from recovering crude price, and...

Pi Securities PCL, Thailand

PTTGC: Expect Strong Recovery in 4Q20 Earnings

We reiterate our ‘BUY’ rating with the upgraded target price to Bt75.0 (from Bt56.5), derived from 1.2xPBV’21E which is equal to its 10 year...

Pi Securities PCL, Thailand

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