Banpu

Banpu Plc
Above estimate: BANPU unveiled a 1Q12 profit of Bt2,785m, down 21% QoQ and 70% YoY. The result was however 27% above our estimate and 15% higher than the street. The better-than-expected number was due to unexpected FX gains from CEY and higher than anticipated gain on diesel hedging contracts. Stripping out the aforesaid extra gains, the number was in line with our expectation.
Results highlights: Core earnings arrived at Bt1,942m, as expected, down 24% QoQ and 6% YoY. Weak ITMG numbers are responsible for the QoQ decline. Rainy season in Indonesia and higher diesel costs hit hard on ITMG. Tonnage sales plunged to 5.7mt from 7.2mt in 4Q11—while GM retreated to 49% from 52% a quarter earlier. ASP also dropped to US$101/t from 4Q11’s US$103/t. CEY’s performance also weakened due to falling GM (33% versus 38%), albeit on higher sales tonnage (3.5mt versus 3.4mt).
On the flipside, equity income from BLCP and the China coal business improved to total Bt567m, up from a loss of Bt207m in 4Q11. BLCP resumed normal operations after its 4Q11 maintenance shutdown, while the selling price adjustment of Hebi and normalization of costs boosted the performance of the China coal operation.
Outlook: Despite the weak 1Q12 numbers, we are optimistic about the 2Q12 outlook. BLCP’s contribution will peak on increased dispatching to EGAT. CEY should post better sales tonnages than originally planned, due to shipments deferred from 1Q12. Moreover, ITMG’s ASP is forecast to rise to US$102-103/t from $101/t in 1Q12. We also see scope for upside to earnings from Hebi—management is negotiating with industrial clients to raise the sales price further from the current RMB550/t.
What’s changed? While the 1Q12 profit of Bt2,785m represents only 20% of our full-year projection, we maintain our FY12 forecast of Bt13,684m unchanged. Earnings will resume uptrend in 2Q12 and the prospects for 2H12 are even stronger. Profit growth will be driven by broad recoveries at ITMG, CEY and at coal assets in China.
Recommendation: Our BUY rating on BANPU stands, premised on good medium-term prospects for coal prices and a buoyant profit outlook. The forecast rebound in coal price following to Chinese seasonal restocking in June and the firm’s earnings uptrend will potentially catalyze share price.