IRPC

IRPC Plc

Profit turnaround misses. Net profit was only Bt2.1bn vs. a loss of Bt4bn in 2Q12 and
Bt647mn in 3Q11, missing SCBS’ Bt3.5bn and consensus’ Bt3.1bn on lower than expected market GIM of only US$6.48/bbl, vs. US$7.24/bbl in 2Q12 and our forecast of US$7.5/bbl. The low GIM is believed due to poor petrochemical product margin - naphtha price was higher while product prices lagged. 9M12 shows a loss of Bt975mn, vs. our Bt2.1bn net profit, meaning 4Q12 needs to reach Bt3bn; we see some downside risk to full-year earnings. Our TP of Bt4/share and Neutral rating are maintained.

Key highlights:
Crude run increased slightly by 5% QoQ and 1% YoY to 16.36mbbl (83% utilization), but sales volume fell by 2% QoQ to 16.75mbbl, mainly on the petroleum side.

Market GIM fell 11% QoQ and 42% YoY to US$6.48/bbl. Key support was petroleum products (refined oil and lube base), where GRM rose from US$2.6/bbl in 2Q12 to US$3.22/bbl in 3Q12, but fell from US$7.37/bbl in 3Q11. Petrochemical product spread was lower both QoQ and YoY at only US$2.44/bbl.

The company booked a stock gain, including reversal of inventory write-down, of Bt1.7bn, or US$3.32/bbl, mainly from its refinery (US$2.97/bbl). Hence, accounting GIM increased from increased from US$0.22/bbl in 2Q12 and US$7.14/bbl in 3Q11 to US$9.81/bbl.Also behind the miss in earnings was a loss on disposal of investments (Bt599mn)
and loss on hedging (Bt170mn). The company sold five subsidiaries and one associate in the quarter, mostly non-operating assets.