BANPU

BANPU  Plc 

- Fx loss to suppress 1Q15 profit at B82m  

 

We estimate 1Q15 net profit at B82m, rising only 24.4%qoq, which is very low, because there is B1bn loss from Fx and currency translation differences. However, normalized profit would grow as much as 46.1%qoq, mainly because BLCP has resumed its full operation. Profit from the coal business would remain low as a result of decreasing average coal price. Overall, 1Q15 is estimated to make up only 2.4% of our full-year forecast.  

 

- 2015 net profit forecast cut likely  

 

We are likely to revise down BANPU’s 2015 net profit forecast after 1Q15 earnings report to reflect significant Fx loss in 1Q15. However, net profit tends to improve in 2Q15 because there will not be massive extraordinary expense like in 1Q15. Normalized profit is still projected to weaken qoq in 2Q15 as a result of decreasing sales from ITMG and Centennial coal mines, but it would revive and the show strongest growth qoq in 3Q15 after sales get back to a high season. In addition, shared profit from Hongsa power plant, which is planned to start a commercial run of phase 1 in July 2015 and phase 2 in November 2015, will help prevent the profit in 4Q15 from weakening like in the same period every year. 

 

- HOLD recommended  

 

2015 fair value (DCF) is B30. We recommend HOLD. The coal price likely has already bottomed out and has a limited downside now. However, most coal selling prices have been entered into a forward contract, which has around three to six month lag time, so if the price rebound in 2H15, it will be reflected in a better coal business in 2016. Yet, in the short term, investors can speculate BANPU following rising coal price.