PTT

PTT Plc

Q1 2013’s profit surges 59%qoq, slightly better than expected
PTT posted 1Q13’s net profit at B36bn, increasing as much as 59%qoq, slightly
better than our projection, due mainly to subsidiaries and FX gain recognition
as follows. 1) PTTEP reported 1Q13’s net profit increasing 47.1%qoq to
B20.3bn, mainly as a result of a significant decrease in the production cost. 2)
Profit from refinery and petrochemical business through subsidiaries such as
TOP, PTTGC, SRPC, IRPC, and BCP has increased from the previous quarter
along with market GRM that has risen following wider finished oil spread. In
spite of a stock loss and LCM from a US$1/bbl decrease in crude oil price at
end-1Q13 from end-4Q12, net GRM of the sector in 1Q13 was US$5.74/bbl on
average. Likewise, petrochemical price and spread in 1Q13 have still increased
for both olefins and aromatics lines. Consequently, overall profit sharing from
investment in the subsidiaries escalated by 27.9%qoq in 1Q13. 3) The
company booked an 88.5%qoq increase in the FX gain to B6.7bn as a result of
the Baht appreciation. Accordingly, 1Q13’s net profit comprised 32.3% of our
FY2013’s earnings forecast.
- Qoq weakness foreseen in 2Q13 from every business
We anticipate a decline in 2Q13’s profit comparing to 1Q13’s because of the
following reasons. 1) Average petroleum selling price is projected to decrease
from 1Q13 on concerns toward the world economy that has been adversely
affected by the Euro-zone debt crunch and 2013’s world GDP growth cut by the
IMF, which have depressed overall oil demands. Furthermore, increasing supply
from the non-OPEC group will also suppress the oil price, and might even cause
a significant stock loss for the refinery sector. 2) Petrochemical selling price is
estimated to decrease from 1Q13. Olefins product price tends to decline
following the prices of crude oil and Naphtha and decreasing demands due to
concerns toward the world economic slowdown. For the aromatics line,
Benzene price is projected to fall as a result of the oversupply problem, while
Paraxylene price would decrease along with decelerating polyester market in
China. 3) PTTGC and TOP have planned for a 60-day and 15-day refinery
maintenance shutdown, respectively. 4) PTTEP might have to recognize an
extraordinary expense for impairment of Montara project in Australia due to a
postponement of the project’s commercial run from February to late May 2013.
- Buy for long-term investment
2013’s fair value, using DCF and sum of the parts, is B398.8/share. We
reiterate our BUY recommendation due to strong business potential of PTT and
its subsidiaries while the share price has been laggard among peers. Moreover,
dividend yield is expected at 4% p.a. on average.