Thai Oil
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Profit growth foreseen in 2015
Thai Oil Plc (TOP)
- 3Q14 faces massive loss as projected
TOP faced net loss of B2.2bn in 3Q14 as projected, versus net profit of
B2.1bn in 2Q14, mainly from stock loss of B3.6bn in total and lower
utilization rate of its refinery and aromatics plant from 95% and 79% in the
previous quarter to 85% and 64%, respectively, as a result of a major
turnaround during June 15 – July 31. Overall, 9M14 profit is B2.5bn or a
decrease of 76.5%yoy, accounting for 77% of our FY2014 forecast.
- To return to net profit in 4Q14
We maintain TOP's FY2014-2015 earnings forecast. TOP's earnings are
projected to revive to net profit in 4Q14. TOP's refinery is projected to work
at its full capacity in 4Q14 after a one-month maintenance shutdown in
3Q14. Oil price is expected to be less volatile, resulting in lower stock loss
than 3Q14. Also, GRM would rise in late 4Q14 owing to high season
(winter). Overall, TOP's net profit is estimated to plunge by 69.4%yoy in
2014, and then revive by 121.2%yoy in 2015 as its refinery would work at
its full capacity.
- Reiterate HOLD
2015 fair value (DCF) is B52. We reiterate to hold TOP, believing that the
share price’s decline has partly reflected the negative factors and the profit
likely has already hit the bottom in 2014.
- 3Q14 faces massive loss as projected
TOP faced net loss of B2.2bn in 3Q14 as projected, versus net profit of
B2.1bn in 2Q14, owing to the following reasons: 1) There is stock loss of
US$6/barrel or B3.6bn in total (because Dubai crude oil price has decreased
US$11.5/barrel from end-2Q14), versus stock gain of US$1.4/barrel in
2Q14. 2) Utilization rate of TOP’s refinery and aromatics plant has
decreased from 95% and 79% in the previous quarter to 85% and 64%,
respectively, as a result of a major turnaround during June 15 – July 31,
causing the cost of operation of the refinery and aromatics plant to increase
by 20.0% from a normal level of US$1.3/barrel and US$0.15/barrel,
respectively. 3) Profit from the lubricating oil business has decreased as a
result of decreasing utilization rate of the plant from 99% to 88% from a
maintenance shutdown in late 3Q14 and an 8.5%qoq decrease in product to
feed margin.
However, 3Q14 earnings benefited from these positive factors: 1) Market
GRM rose by 4.5%qoq to US$4.6/barrel. 2) Spreads of paraxylene and
benzene (aromatics products) widened by 68.6%qoq and 28.7%qoq to
US$371/ton and US$327/ton, respectively; supply decreased as a result of
a production halt by many aromatics plants in early 3Q14 from very low
spread in 2Q14. 3) TOP recognized hedging gain and Fx gain of around
B695m and B561n, respectively, in this quarter. Overall, 9M14 profit is
B2.5bn, decreasing 76.5%yoy and accounting for 77% of our FY2014
forecast.
