PTT

PTT Plc

Slightly above estimate: PTT posted a 1Q12 profit of Bt37,386m (EPS: Bt13.33), up a substantial 125% QoQ and 8% YoY and a new record. The result exceeded our estimate by 4% and overshot the street by 8%, driven by better-than-expected performances by refining units, mainly TOP. Core earnings were Bt24,164m, as modeled, up by 43% QoQ and 17% YoY. 
Results highlights: Gas business EBITDA jumped 62% QoQ to Bt15,965m. Gas throughput recovered a strong 9% QoQ to 4,284mmcfd, led by industrial customers. Furthermore, PTT’s pooled gas price increased in tandem with the spike in oil prices, while the mean GSP product price inched up. Those factors outweighed the effect of lower GSP product sales volume, which dipped 3% QoQ to 1.46m tonnes in 1Q12, due to a 30-day shutdown of the sixth GSP unit.
Oil business EBITDA surged 67% QoQ to Bt4,793m, led by sales volume and stock gains. Sales volume rose a hefty 14% QoQ to 22,025m liters because of increased LPG and diesel sales. Also, the firm booked gains on product inventories aligned with a crude price rise.
On the flipside, coal business EBITDA dived 63% QoQ to Bt1,199m during the quarter. ASP slipped 6% QoQ to US$94/t and sales tonnages plunged by 35% QoQ to only 2m tonnes, due to equipment relocation for the start-up of two new pits in Jembayan. Coal production costs also rose because of higher diesel prices.
Outlook: The 2Q12 net profit outlook is subdued, as extra gains from PTT and all subsidiaries (particularly stock gains) will reverse into heavy losses, but we anticipate a stronger core number. Gas sales should set a new record high—management guided that gas sales hit 4,500mmcfd in March (so should have been even higher in April, which was hotter). Also, GSP production will rise (1Q12 was the trough for the year), due to fewer scheduled shutdowns.   
What’s changed? Although the 1Q12 bottom-line represents 32% of our full-year forecast, we maintain it unchanged for the moment at Bt115,158m—the 2Q12 net profit is likely to fall sharply QoQ.
Recommendation: PTT remains our top pick within Thai Energy space. Its 2Q12 net profit outlook may be subdued, but the prospects for the sector as a whole are even weaker, so the stock should outperform other Thai Q&G counters in relative terms. Note that PTT’s operational numbers will strengthen in 2Q12, led by record gas throughput and a recovery in GSP output volume.