Thai Oil

Thai Oil Plc (TOP)

3Q12 reverts to higher-than-expected net profit, thanks to stock gain


Up 2012’s profit forecast to reflect extraordinary items.
4Q12’s norm profit to stabilize


2013’s FV is B80.12/share. Refinery business will be outstanding in next 6 months

3Q12 reverts to higher-than-expected net profit, thanks
to stock gain
TOP posted 3Q12’s earnings with a high net profit of B10bn, reversing from a net loss of B6.9bn in 2Q12 and slighter better than our projection as we had estimated stock gain and a reversal of LCM B1.6bn lower than the real figure. Total profit from the 2 items in 3Q12 was B5.7bn, or US$4.1/bbl, while other items remained close to our projection. Market GRM in 3Q12 has shifted to US$7.6/bbl from US$4.6/bbl in the prior quarter despite a decline in utilization rate to 97% from 102% from a
25-day planned maintenance shutdown of CDU1, HDT1, and HVU1 which made overall product selling volume decrease 8%qoq. Including with the above-mentioned stock gain, earnings from the refinery business in 3Q12 reversed to a profit of B8.9bn, compared with a loss of B8.6bn in 2Q12. On the contrary, profit from aromatics business in 3Q12 has plunged by 52.7%qoq to stand at only B419m from product to feed margin that had declined 27%qoq to US$98/ton due to pressure from decreasing demand from polyester producers, lower production of PTA plants (Px is raw material) that faced loss, and increasing raw material cost following the oil price. Overall, net profit in 9M12 stood at B10.4bn, falling 20% from the same period last year but still larger than our FY2012’s profit forecast.

Up 2012’s profit forecast to reflect extraordinary items.
4Q12’s norm profit to stabilize
We revise up our net profit forecast for 2012 by 43% to reflect extraordinary items in 3Q12 such as stock gain, reversal of LCM, as well as FX gain that we have not included in our previous forecast. In addition, norm profit in 4Q12 is projected to stabilize at a high level, especially from the refinery business (which comprises 70% of total profit of TOP) as winter in coming in the end of the 4th quarter and demand for middle distillate, both diesel and jet fuel, would rise, boosting GRM to stand above US$10/bbl (based on Singapore’s market) and hit the record high once again in 2013’s first quarter and continuously in the second quarter. For the aromatics business, the
profit is projected to stay close to that of 3Q12 or even increase from a return of demand from operators in China.


2013’s FV is B80.12/share. Refinery business will be outstanding in next 6 months
New 2013’s fair value, using DCF, is B80.12. We reiterate our recommendation of “BUY” due to the tendency of refining margin that’s still in uptrend in the next 3-5 months from a high season of GRM.