IRPC

IRPC Plc
B3bn of net profit projected in Q3 2012 due mainly to stock gain IRPC’s Q3 2012 operating result is projected to flip back to B3bn of net profit
from B4bn of net loss in Q2 2012 due to the following reasons. 1) The recognition of stock gain and reversal of lower-of-cost-or-market inventory
valuation (reverse LCM) stand at B2.7bn or US$6/bbl from the crude oil price at end-Q3 2012 that has increased from Q2 2012 by 17.9%. 2) The company has
recognized the profit projected at B125m since Q3 2012 from a purchase of 25% investment in UCHA (caprolactam plant). 3) The company has recognized FX
gain at around B250m from the appreciation of Baht. In terms of norm profit, market GIM (gross integrated margin) in Q3 2012 is projected to drop by 6%
QoQ to average US$6.8/bbl because of the pressure from the spread of petrochemical products that has decreased from Q2 2012. Although the average
product price has increased by 8-10% QoQ, the cost of raw material, naphtha, has risen even more by 16% QoQ. Nevertheless, the company is
projected to benefit from the petroleum business due to the gross refining margin (market GRM) that has increased by 30% QoQ (based on Singapore’s
market). In addition, the loss from hedging in Q3 2012 is projected to be recognized by B500m. Overall, IRPC’s 9M12 operating result is projected to
face net loss at B117m compared with B6.3m of net profit during the same period of last year.

Q4 2012 norm profit projected to thrive constantly
The norm profit in Q4 2012 is projected to thrive continuously from Q3 2012 from every business line. The profit from petroleum business would grow notably
along with the high season from an arrival of the winter in many continents which would raise the demand for oil especially diesel and jet fuel. Moreover,
the oil stock in the US and Europe is very unusually low, so if this winter gets unordinary cold, the demand for oil to reserve for the winter would increase,
which is a positive factor for the refinery business. For the petrochemical business, the demand is projected to increase along with the high season.
Furthermore, there’s hope that China (the main consumer of petrochemical products) would return to launch the economic-stimulus measure soon,
urging producers to restock raw materials once again. In Q4 2012, the company is projected to recognize revenue and profit from the expansion of PRP
project (propylene) with the production capacity of 100,000 tons/year and the expansion of lube oil project with production capacity of TDAE at 28,000
tons/year and 150-BS at 38,000 tons/year which would be completed at early-Q4 2012. In addition, IRPC is projected to recognize profit from land sale
(150 rais) in Q4 2012 around B240m (after tax), considered 18% of 2012 profit forecast. The company plans to sell 4,000 rais (from the total 15,000 rais)
within the next 5 years, which is still not included in our forecast, so we will revise our forecast once again after the announcement of Q3 2012 earnings
result.

Reiterate “BUY”… 2013 PER is 9x, dividend yield is 6.4%
Fair value, using DCF, at end-2012 and 2013 is B4.40 and B5.46 respectively. We reiterate our recommendation of “BUY” due to the positive
factor from 2H12 operating result that would rebound to net profit and would grow constantly in 2013. In addition, 2013 PER has declined to only 9x,
which is lower than the sector’s average at 12x.