Bangchak Petroleum

Bangchak Petroleum Plc (BCP)

3Q13 profit skyrockets 234%qoq, thanks to stock and Fx gains

BCP posted 3Q13 net profit at B1.36bn, skyrocketing 234.1%qoq and exceeding
our projection because we had underestimated a stock gain. In 3Q13, the company
could book a stock gain of US$3.17/barrel or B926m worth, versus a stock loss of
US$3.52/barrel or B919m in 2Q13. The significant increase in profit in 3Q13 has
also resulted from the resumption of BCP’s refinery at a utilization rate of 83.8%
from 79.7% in 2Q13 in which there was an unplanned shutdown, and a Fx gain of
B44m, compared with a massive Fx loss of B1.1bn in the previous quarter. The
afore-mentioned positive factors could offset the following negative factors. 1)
Market GRM has declined 17%qoq to US$4.72/barrel on average due to narrower
spreads of benzene and fuel oil. Particularly, spread of fuel oil decreased
significantly from –US$3.65/barrel to –US$10.57/barrel. Moreover, fuel oil volume
in 3Q13 increased as a result of a temporary shutdown of a hydrocracker unit after
there was a problem at a combined power plant of PTT until it could not supply
power to the refinery, making the base GRM in 3Q13 lower than usual. 2) Profit
from the marketing business is projected to drop 24%qoq following a 2%qoq
decrease in sales because of the rainy season and a decrease of 10%qoq in
marketing margin to B0.53/liter due to a fiercer price competition for industrial
customers. 3) Profit from the solar power plant phase 1 and 2 has decreased
5%qoq on seasonal effect (rainy season). Overall, 9M13 net profit was B3.96bn, up
26.8% from the same period last year and making up 73% of our FY2013 forecast.
- 2013-2014 forecast cut, but 2014 profit to grow continuously 9%yoy
We revise down our FY2013-2014 forecast. For FY2013, we slash our assumptions
for the following issues: 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 decrease our assumption for the 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. Accordingly, after the
revision, FY2013-2014 net profit would decrease 11.3% and 15.2% from the
previous forecast, respectively. However, we estimate the profit in 4Q13 to decline
35%qoq because there would not be a high stock gain like it was in 3Q13.
Nevertheless, there would still be a support from GRM that 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. Overall, we project BCP’s profit to
grow 13.3%yoy in 2013 and 9.0%yoy in 2014. 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.
- 32% upside from 2014 fair value. Buy
FY2014 fair value (DCF) is B43.60/share. We reiterate to buy BCP as 2014 PER is
only 8.6x, lower than the regional average of 12.6x and the current share price has
32% upside.