Brokers differ on Bangchak stock after blaze

However, many brokers suggested different ratings, ranging from “buy” to “trading buy” to “sell” for BCP stock. 

BCP stock in the short term is under pressure, as the fire at its core distillation unit will reduce its production capacity by 66.7 per cent for one month, said one broker. It also suggested that investors switch to other oil stocks such as Thai Oil and PTT Global Chemical. 

Initially, Bangchak Petroleum is expected to take a few months to repair the damage, with a maintenance budget of Bt20 million to Bt30 million. If it finds it has to build a new distillation plant, the construction cost could be as much as Bt100 million. However, Asia Plus Securities said in its research that it believed Bangchak Petroleum would receive a full insurance pay-out for business interruption.

It said the refinery blaze would reduce BCP’s earnings per share by 6.8-7.9 per cent, based on temporary closure of Distillation Unit 3, which has capacity of 80,000 barrels a day, for one month. However, this closure would not affect overall domestic supply of 1 million barrels a day. Of that, about 9.9 per cent is BCP throughput.  “The research centre is now reviewing its projection on BCP’s earnings and fair value to reflect a reduction in refinery margin from US$5 per barrel to US$4.5.” 

Supanna Suwankird, an analyst at Thanachart Securities, said a one-month shutdown of the refinery would not cause serious effects. But if the closure lasts longer than three months, there will be business interruption. Despite some downside earnings risks, the broker maintained its “buy” rating on BCP stock, as the company still has various businesses such as solar and biodiesel plants diversifying risks from the refinery business. 

An analyst at Phillip Securities recommended accumulated trading on BCP shares. Although the worst-case scenario of a three-month shutdown could result in an 18.6-per-cent loss from the projected profit for this year, there is still an upside projection.Maybank Kim Eng rates BCP as a “buy”. The uncertainty of the situation will put the stocks under pressure. There are many factors to be considered – the insurance conditions and coverage, the length of the shutdown period, and the business interruption. It should be clear by next week.

Meanwhile, Kiatnakin Securities recommended that investors sell their BCP shares because the shutdown of the company’s distillation unit for one month would slash its projection for this year’s net profit by 6.5 per cent. The broker targets BCP’s net profit this year at Bt4.02 billion. 

“Bangchak Petroleum’s earnings in the second quarter are likely to weaken both on-quarter and on-year because of the decreasing base gross refining margin and the Bt1.6-billion-to-Bt1.8-billion stock loss from the weakening oil price. So more investments in BCP now are risky,” said the broker. BCP stock yesterday was down by 0.88 per cent to close at Bt22.6 per share.