IRPC

IRPC Plc

B1.25bn net loss projected in 2Q13 from stock loss and Fx loss
We estimate 2Q13 earnings of IRPC at a net loss of B1.25bn, compared with a net
profit of B153m in 1Q13, due to following reasons. 1) The company has booked a
stock loss of around US$1/barrel as Dubai crude oil price has dropped US$6.7/barrel
from end-1Q13 to US$100.4/barrel at end-2Q13. 2) The company has booked a Fx
loss of B720m due to the Baht depreciation of B1.8/US$ from end-1Q13 because
IRPC has a Dollar debt of around US$400m. Excluding these 2 items, the norm profit
in 2Q13 would only break even. Market GIM (gross integrated margin) in 2Q13
would stand at only US$8/barrel, up from US$7.4/barrel in 1Q13. Although gross
refinery margin (GRM) is anticipated to decrease 18.5%qoq in this quarter, it would
be compensated by olefins spreads that have widen from the previous quarter.
Spread of HDPE – Naphtha has risen 12.8%qoq to US$588/ton, while spread of PP –
Naphtha has shifted 5.7%qoq to US$614/ton. However, the GIM would be offset by
selling and administrative expense, depreciation, and interest expense of totaling
US$8/barrel, so earnings in 1H13 would be a net loss of around B1.1bn, comparing
to our FY2013 forecast for a net profit of B2bn.
- Cut FY2013 forecast to reflect bad performance in Q2 2013
We revise down our earnings forecast for FY2013 by 39.8% in order to reflect the
significant net loss projected in 2Q13 as a result of the stock loss and the Fx loss.
However, we believe the economy would gradually improve in the second half of the
year and thus revive demands for petroleum and petrochemical, making the prices
and spreads increase again. Furthermore, according to the Phoenix project, IRPC has
planned to enhance a production capacity of ABS extension by 60,000 million tons a
year, which would be complete by 3Q13 (EBSM, a feedstock of ABS, would be shut
down for 2 months during June – July 2013 for tied-in). Accordingly, we believe the
company would return to show net profit again in 2H13, with remarkable growth
foreseen in 2014. We estimate a net profit in FY2013 at B1.24bn, versus a net loss
of B959m in FY2012. Magnificent profit growth of 236%yoy is projected in 2014.
- Recommend only HOLD. No supporting factor in short-term
Under the new forecast, new FY2013 fair value is B4.01/share (DCF), comparing to
B4.33/share previously). We recommend only holding for IRPC because there are
still not supporting factors in the next 1-2 months except gradually improving
petroleum and petrochemical product prices in 2H13 along with the economic
condition. IRPC has been investing according to its Phoenix project in order to
generate long-term growth that will strengthen its petrochemical business with more
diversified and special products. The Phoenix project is scheduled to finish in 2015.
Moreover, there would not be interim dividend payment in 2013 because of the net
loss in 1H13, but FY2013 dividend is expected at B0.02/share or a yield of only 0.5%
p.a.