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 share price decline has largely priced in the outlook of a weak GRM QoQ in 2Q24E, in line with the Singapore GRM.</li><li>The normalization of the 2024E GRM (weaker YoY) has been incorporated into our earnings projections.</li><li>Meanwhile, the commercial commencement of the Clean Fuel Project (CFP) in 2025E, which will generate an incremental GRM, should reaffirm our view of strong long-term earnings prospects, with projected 2024-26E EPS growth at a 23% CAGR.</li></ul>

The share price decline has largely priced in the outlook of a weak GRM QoQ in 2Q24E, in line with the Singapore GRM.The normalization of the 2024E GRM (weaker YoY) has been incorporated into our earnings projections.Meanwhile, the commercial commencement of the Clean Fuel Project (CFP) in 2025E, which will generate an incremental GRM, should reaffirm our view of strong long-term earnings prospects, with projected 2024-26E EPS growth at a 23% CAGR.

Thai Oil -Upbeat 1Q24 Earnings; CFP Project to Drive LT Earnings

<ul><li>TOP is expected to make a good start to the year with strong 1Q24E NP of Bt5.05bn in 1Q24E (+72% QoQ, +11% YoY).</li><li>We believe the firm will be able to achieve our 2024E NP estimate, with the potential normalization of the GRM to be offset by a lower crude premium YoY.</li><li>Meanwhile, the commercial commencement of the Clean Fuel Project (CFP) in 2025E, which will generate an incremental GRM, should reaffirm our view of strong long-term earnings prospects, with projected 2024-26E EPS growth at a 23% CAGR. </li></ul>

TOP is expected to make a good start to the year with strong 1Q24E NP of Bt5.05bn in 1Q24E (+72% QoQ, +11% YoY).We believe the firm will be able to achieve our 2024E NP estimate, with the potential normalization of the GRM to be offset by a lower crude premium YoY.Meanwhile, the commercial commencement of the Clean Fuel Project (CFP) in 2025E, which will generate an incremental GRM, should reaffirm our view of strong long-term earnings prospects, with projected 2024-26E EPS growth at a 23% CAGR. 

Thai Oil - Strong 1Q24E Earnings; Good LT Earnings Momentum

<ul><li>We retain our positive view on the gross refining margin (GRM) in 2024E, driven by sustained high crack spreads of middle distillates (TOP’s yield for this product is around 55%).</li><li>The GRM momentum is expected to continue in 2025E given lower new refining capacity, which will align with the planned commercial commencement of TOP’s Clean Fuel Project (CFP) in the same year.</li><li>This is expected to foster LT EPS growth at a 23% CAGR during 2024-26E. We maintain an Outperform rating and the 12M FV of Bt62.4.</li></ul>

We retain our positive view on the gross refining margin (GRM) in 2024E, driven by sustained high crack spreads of middle distillates (TOP’s yield for this product is around 55%).The GRM momentum is expected to continue in 2025E given lower new refining capacity, which will align with the planned commercial commencement of TOP’s Clean Fuel Project (CFP) in the same year.This is expected to foster LT EPS growth at a 23% CAGR during 2024-26E. We maintain an Outperform rating and the 12M FV of Bt62.4.

Thai Oil - 4Q23 and 2023 Earnings in Line; Solid GRM Outlook

Thematic (Sector/Industry)

<ul><li>We maintain a Neutral rating on the energy sector due to external factors, including Trump 2.0 policies, the US-China trade war, and risks from domestic government policies related to energy pricing that may pose downside risk to the 2025-26E earnings forecasts.</li><li>However, downside risks for SET ENERGY appear more limited as the implied EPS has declined near its average level, indicating that market expectations for EPS have adjusted closer to the consensus.</li><li>We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. </li></ul>

We maintain a Neutral rating on the energy sector due to external factors, including Trump 2.0 policies, the US-China trade war, and risks from domestic government policies related to energy pricing that may pose downside risk to the 2025-26E earnings forecasts.However, downside risks for SET ENERGY appear more limited as the implied EPS has declined near its average level, indicating that market expectations for EPS have adjusted closer to the consensus.We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. 

Energy (Upstream-Downstream) - DECEMBER 17, 2024

<ul><li>We have revised down our Dubai crude oil price assumptions for 2024-26E to USD80, USD75, and USD73/bbl, respectively.</li><li>The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to negatively impact PTTEP, as approximately 30% of its sales volume is exposed to crude oil prices, and the stock shows a high correlation of around 0.8 with crude oil prices.</li><li>For the refinery sector, we anticipate short-term negative effects, likely due to inventory losses in 3Q24E from the sharp decline in crude oil prices, against a neutral impact in the medium term given declining crude oil costs and crude premiums. </li></ul>

We have revised down our Dubai crude oil price assumptions for 2024-26E to USD80, USD75, and USD73/bbl, respectively.The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to negatively impact PTTEP, as approximately 30% of its sales volume is exposed to crude oil prices, and the stock shows a high correlation of around 0.8 with crude oil prices.For the refinery sector, we anticipate short-term negative effects, likely due to inventory losses in 3Q24E from the sharp decline in crude oil prices, against a neutral impact in the medium term given declining crude oil costs and crude premiums. 

Industry Update: Energy (Oil) - SEPTEMBER 30, 2024

Thailand

Thai Oil Public Company Limited is an oil refinery company. The Company imports crude oil and refines it into gasoline.  It also produces oil related products including liquefied petroleum gas (LPG), kerosene, fuel oil and chemicals. Thai oil supplies its products to domestic market where its major customers include Shell, Caltex Oil and the Petroleum Authority of Thailand.

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Thai Oil (TOP-R TB)

Thai Oil -Upbeat 1Q24 Earnings; CFP Project to Drive LT Earnings

Meanwhile, the commercial commencement of the Clean Fuel Project (CFP) in 2025E, which will generate an incremental GRM, should reaffirm our view...

Krungthai XSpring

Thai Oil - Strong 1Q24E Earnings; Good LT Earnings Momentum

We believe the firm will be able to achieve our 2024E NP estimate, with the potential normalization of the GRM to be offset by a lower crude...

Krungthai XSpring

Thai Oil - 4Q23 and 2023 Earnings in Line; Solid GRM Outlook

We retain our positive view on the gross refining margin (GRM) in 2024E, driven by sustained high crack spreads of middle distillates (TOP’s yield...

Krungthai XSpring

Energy (Upstream-Downstream) - DECEMBER 17, 2024

We reiterate our preference for downstream over upstream players and favor refiners over oil retailers. Our top pick remains BCP (Outperform; FV at...

Krungthai XSpring

Industry Update: Energy (Oil) - SEPTEMBER 30, 2024

The downward trend in oil prices due to global risks (e.g., increased supply and slower demand amid the unrest in the Middle East) is expected to...

Krungthai XSpring

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