The Bangchak Petroleum

The Bangchak Petroleum Plc (BCP)

Stock and Fx gains to support 3Q13 profit growth
We estimate 3Q13 net profit at B1.21bn, growing threefold from the prior
quarter due to contribution as follows. 1) A stock gain of US$2.7/barrel is
projected as Dubai crude oil price at end-3Q13 has risen US$4.4/barrel from
end-2Q13, versus a stock loss of US$3.5/barrel in the previous quarter. 2) A Fx
gain of around B20m is projected, comparing to a massive Fx loss of B1.1bn in
2Q13. 3) Refinery utilization rate would increase 5.6%qoq to 101,000 barrels a
day after an unplanned shutdown in 2Q13 reduced the daily utilization rate to
lower than 100,000 barrels. These three positive factors would offset the
following negative factors in this quarter. 1) Market GRM would weaken
18.9%qoq to US$4.7/barrel on average due to narrower spreads of benzene and
fuel oil, while around US$0.6/barrel gain from hedge is projected, close to that
of the prior quarter. 2) Profit from marketing business would drop 11.1%qoq
following a 1.6%qoq decrease in sales to 405 million liters a month because of
the rainy season and a projected decrease of 13.5%qoq in marketing margin to
B0.51/barrel due to a fiercer price competition. Profit from the solar power plant
phase 1 and 2 is projected close to that of the previous quarter. Moreover,
insurance claim (extraordinary income) will not be recorded in 3Q13 like it was
in 2Q13. Overall, 9M13 net profit is estimated at B3.8bn, up 21.7% from the
same period last year and making up 69.7% of our FY2013 forecast.
- Likely to cut forecast after earnings report. Growth still foreseen
yoy
We are likely to revise down our FY2013-2014 forecast after 3Q13 earnings
declaration. For FY2013, we would slash our assumption for 1) refinery
utilization rate from 114,000 barrels a day to 100,000 barrels, reflecting the
unplanned shutdown in 2Q13, 2) stock and Fx loss/gain in 9M13, and 3)
insurance claims income from B1.5bn in 2Q13. For FY2014, we would decrease
our assumption for refinery utilization rate to only 96,000 barrels a day from
120,000 barrels previous projected because there will be a 45-day shutdown for
major overhaul and a change of the refining tower to enhance the capacity from
80,000 barrels a day to 100,000 barrels. Preliminarily, after the revision, FY2013
normalized and net profit forecast would decrease 30% and 12% from the
previous forecast, respectively, while FY2014 profit forecast would drop 17%
from the previous forecast. However, normalized profit in 4Q13 would grow from
3Q13 (4Q13 net profit would comprise 21% of FY2013 forecast) as GRM will be
rising during winter in which demands for diesel and fuel oil are usually high. At
the same time, refinery utilization rate is projected to stand above 100,000
barrels a day, while the marketing business would also improve from 3Q13
thanking to the tourism high season which usually boosts the demand. For
FY2014 profit outlook, the refinery shutdown would be compensation by income
from phase 1 and 2 of the solar power plant that will be recognized for a full
year while the phase 3 will start to generate income, so the growth of 8.2%yoy
is still foreseen.
- Buy. High upside of 27% implied from new fair value
FY2013 fair value under the new forecast (DCF) would be B43.13/share (from
B50/share previously), implying 27% upside. Buy.