Thai Oil

Thai Oil (TOP)
- B6.5bn net profit projected in 3Q13 from stock gain and lower Fx loss
We estimate 3Q13 earnings of TOP to revert to a net profit of B6.55bn, versus a net
loss of B1.56bn in the prior quarter, thanking to the following contributions. 1)
Market GRM has increased 16.6%qoq to US$4.2/barrel, whereas the sector’s GRM
might decrease from 2Q13, as spread of middle distillate (diesel and jet fuel), which
makes up more than 50% of TOP’s products, has widened significantly in the first two
months of 3Q13. 2) Refinery utilization rate has increased to 104% from 102% in the
previous quarter. 3) A stock gain of US$3.4/barrel or B2.5bn worth is anticipated as
crude oil price at end-3Q13 has risen US$8/barrel from end-2Q13, comparing to a
stock loss of B1.1bn last quarter. 4) Profit from aromatics business is projected to
shift 3.5%qoq as paraxylene spread has increased 3.7%qoq and the utilization rate
rose to 89% from 87% in the previous quarter. 5) Profit from the lubricant business
(TLB) is projected to grow 8.5%qoq following the product spread that has increased
4.8%qoq and the utilization rate that went up from 105% last quarter to 112%. 6) Fx
loss is projected to decrease to B465m from B2.9bn in 2Q13. Overall, 9M13 net profit
is estimated at B9.35bn, down 10% from the same period last year and accounting
for 75.2% of FY2013 forecast.
- Maintain 2013 forecast but might reduce 2014 to reflect shutdown
Preliminarily, we maintain our net profit forecast for FY2013, projecting the
normalized profit (stock and Fx loss/gain excluded) in 4Q13 to rise from 3Q13 on
seasonal effects. Refinery business will benefit from approaching winter in many
countries worldwide which usually comes together with increasing demands for oil as
fuel, especially diesel and jet fuel which are TOP’s main products. In addition,
maintenance shutdowns of refineries in Europe would make some supply disappear,
which would help negate an effect from new capacity from a 400,000-barrel-a-day
Jubail refinery in Saudi Arabia that is starting a commercial run in late 4Q13.
Similarly, spread of aromatics products in 4Q13 would remain high close to those of
3Q13 because of a polyester season during winter. However, we are likely to revise
down our profit forecast for FY2014 after 3Q13 earnings declaration in order to reflect
the major turnaround of CDU unit 3 with a capacity of 165,000 a day for 40 days in
the middle of the year, which would make the utilization rate drop to only 95% from
100% previously projected. Preliminary projection shows that the new forecast would
be 8% lower than the previous one.
- Buy. 14% upside still seen from new fair value
Based on the new forecast, new FY2013 fair value (DCF) will be B74.04 (from B77 at
present), implying 14.3% upside from the current share price. Buy.