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

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Pi Securities PCL, Thailand

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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

Star Petroleum Refining / Equity Bottom-Up

<ul>
<li>SPRC reported a 3Q21 net profit of Bt113m (-58% YoY, -85% QoQ). The result came out lower than our expectation. However, the 9M21 net profit accounted to  74% </li>
<li>Excluding stock gain of Bt810m, core EBITDA was Bt6.0m (-95%YoY,-97%QoQ).</li>
<li>The YoY and QoQ drop was mainly due to refinery margin contraction following a weak fuel demand and rising crude premium.</li>
</ul>


SPRC reported a 3Q21 net profit of Bt113m (-58% YoY, -85% QoQ). The result came out lower than our expectation. However, the 9M21 net profit accounted to  74% 
Excluding stock gain of Bt810m, core EBITDA was Bt6.0m (-95%YoY,-97%QoQ).
The YoY and QoQ drop was mainly due to refinery margin contraction following a weak fuel demand and rising crude premium.


SPRC: 3Q21 Profit Fell from Declined Products Sales and Margin

<p><strong>Analyst meeting comes out with positive tone. We expect refinery margin to continue improving in 2H21 led by solid gasoline and increasing diesel demand. However, this will be dragged by rising crude premium.</strong></p><div>• We expect the market GRM to increase to US$3.0/BBL in 3Q21 (+13% QoQ) and keep increasing each quarter backed by global economic recovery</div><div></div><div>• The refinery utilization rate should remain flat QoQ at 77%, as the domestic market is still under 3rd wave COVID grip.</div><div></div><div>• The gasoline spread has already fully rose to pre-Covid level at US$12.0/BBL in July. We anticipate a betterment in jet and diesel demand in 2H21 because of global vaccination</div><div></div><div>• The firm will benefit from gasoline and diesel spread improvement as they account to 28% and 39% of total output (as of 2Q21).</div><div></div><div><strong>We maintain the BUY rating based on a target price at Bt9.7, pegged to 1.5xPBV’21E which is equivalent to +1SD of its 5-years average.</strong></div>

Analyst meeting comes out with positive tone. We expect refinery margin to continue improving in 2H21 led by solid gasoline and increasing diesel demand. However, this will be dragged by rising crude premium.• We expect the market GRM to increase to US$3.0/BBL in 3Q21 (+13% QoQ) and keep increasing each quarter backed by global economic recovery• The refinery utilization rate should remain flat QoQ at 77%, as the domestic market is still under 3rd wave COVID grip.• The gasoline spread has already fully rose to pre-Covid level at US$12.0/BBL in July. We anticipate a betterment in jet and diesel demand in 2H21 because of global vaccination• The firm will benefit from gasoline and diesel spread improvement as they account to 28% and 39% of total output (as of 2Q21).We maintain the BUY rating based on a target price at Bt9.7, pegged to 1.5xPBV’21E which is equivalent to +1SD of its 5-years average.

SPRC: GRM Recovery to Be Dragged by Higher Crude Premium

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>
<p></p>
<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 ,




<p><strong>Analyst meeting comes out with a slight positive tone. We expect refinery margin to continue improving from 2Q21 onwards, led by gasoline consumption.</strong></p><div>• SPRC reported a 1Q21 net profit at Bt2bn (flipped from a loss YoY, +132%QoQ). Core EBITDA was Bt562m (flipped from a loss YoY, -34%QoQ).</div><div></div><div>• A YoY recovery was mainly due to an increase in refinery margin. In contrast, a slight drop in sales volume and rising crude premium caused a QoQ weakness.</div><div></div><div>• We expect SPRC’s core earnings to grow QoQ, driven by solid gasoline demand and expectation on international flight resumption in 2H21.</div><div></div><div>• We revise up our earnings forecast in 2021-22E to reflect an upward GRM momentum.</div><div></div><div><strong>We maintain a HOLD rating but revise up our target to Bt9.7 (from Bt8.0), by revising PBV up to 1.5xPBV’21E, which equal to +1SD to its 5-years average on the back of quick gasoline spread recovery.</strong></div>

Analyst meeting comes out with a slight positive tone. We expect refinery margin to continue improving from 2Q21 onwards, led by gasoline consumption.• SPRC reported a 1Q21 net profit at Bt2bn (flipped from a loss YoY, +132%QoQ). Core EBITDA was Bt562m (flipped from a loss YoY, -34%QoQ).• A YoY recovery was mainly due to an increase in refinery margin. In contrast, a slight drop in sales volume and rising crude premium caused a QoQ weakness.• We expect SPRC’s core earnings to grow QoQ, driven by solid gasoline demand and expectation on international flight resumption in 2H21.• We revise up our earnings forecast in 2021-22E to reflect an upward GRM momentum.We maintain a HOLD rating but revise up our target to Bt9.7 (from Bt8.0), by revising PBV up to 1.5xPBV’21E, which equal to +1SD to its 5-years average on the back of quick gasoline spread recovery.

SPRC: On Track of Recovery from 2Q21 Onwards

<p><strong>Yesterday analyst meeting came out with a slight positive tone. We expect refinery margin to continue improving and jump in 2Q21, supported by declining inventory, maintenance season in Q2 and vaccination.</strong></p><div>• SPRC reported a 4Q20 net profit at Bt862m (flipped from a loss YoY, +222%QoQ). Core EBITDA in 4Q20 recovered to Bt855m (flipped from a loss YoY, +624%QoQ) as production resumed YoY and GRM recovered.</div><div></div><div>• The company announced no dividend payment as we expected.</div><div></div><div>• We foresee SPRC’s core earnings to continue improving from 1Q21 onwards, backed by a GRM recovery and product optimization.</div><div></div><div>• As refinery margin is improving, we upgrade our target price to Bt8.0 (from Bt6.9) by revising PBV up to 1.2xPBV’21E, which equal to Thai refinery peer and its 5-years average (from 1xPBV’21E which is -1SD to its 5 year average).</div><div></div><div>• However, we maintain a HOLD rating as stock price has outperformed its Thai refinery peer.</div>

Yesterday analyst meeting came out with a slight positive tone. We expect refinery margin to continue improving and jump in 2Q21, supported by declining inventory, maintenance season in Q2 and vaccination.• SPRC reported a 4Q20 net profit at Bt862m (flipped from a loss YoY, +222%QoQ). Core EBITDA in 4Q20 recovered to Bt855m (flipped from a loss YoY, +624%QoQ) as production resumed YoY and GRM recovered.• The company announced no dividend payment as we expected.• We foresee SPRC’s core earnings to continue improving from 1Q21 onwards, backed by a GRM recovery and product optimization.• As refinery margin is improving, we upgrade our target price to Bt8.0 (from Bt6.9) by revising PBV up to 1.2xPBV’21E, which equal to Thai refinery peer and its 5-years average (from 1xPBV’21E which is -1SD to its 5 year average).• However, we maintain a HOLD rating as stock price has outperformed its Thai refinery peer.

SPRC: GRM to Be Supported by Maintenance Season in Q2

Thailand

Star Petroleum Refining PCL offers  petroleum products both for domestic consumption and for export and operates a crude oil refinery. Star Petroleum Refining operates in Thailand.

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Star Petroleum Refining (SPRC TB)

SPRC: 3Q21 Profit Fell from Declined Products Sales and Margin

SPRC reported a 3Q21 net profit of Bt113m (-58% YoY, -85% QoQ). The result came out lower than our expectation. However, the 9M21 net profit...

Pi Securities PCL, Thailand

SPRC: GRM Recovery to Be Dragged by Higher Crude Premium

Analyst meeting comes out with positive tone. We expect refinery margin to continue improving in 2H21 led by solid gasoline and increasing diesel...

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

SPRC: On Track of Recovery from 2Q21 Onwards

Analyst meeting comes out with a slight positive tone. We expect refinery margin to continue improving from 2Q21 onwards, led by gasoline consumption.

Pi Securities PCL, Thailand

SPRC: GRM to Be Supported by Maintenance Season in Q2

Yesterday analyst meeting came out with a slight positive tone. We expect refinery margin to continue improving and jump in 2Q21, supported by...

Pi Securities PCL, Thailand

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