IRPC

IRPC Plc 

- Massive net profit in 1Q15 as expected  

IRPC posted massive net profit of B3.8bn in 1Q15, close to our projection, versus net loss of B5.78bn in 4Q14, because stock loss (LCM included) decreased to only US$0.53/barrel and market GIM rose 25.8%qoq to US$13.06/barrel, resulting in net accounting GIM of US$12.51/barrel in 1Q15. In addition, there was extraordinary income from a reversal of allowance for bad debts of B2.8bn since a debtor decided to repay the debt with land. Overall, 1Q15 net profit comprised 47.6% of our FY2015 forecast. 

 

- Net profit to weaken, normalized profit to stabilize in the rest of 2015  

We maintain our forecast for 2015, projecting to see net profit of B8.04bn, while normalized profit would remain high in the rest of the year. In 2Q15, GRM would be boosted by an annual turnaround of worldwide refineries and petrochemical spreads would surge strongly again. For 3Q15, the refinery business will be significantly impacted by a low season and new supply, but the overall profit would be sustained by the petrochemical business. For 4Q15, overall margin will increase at least US$2/barrel from present after the UHV project starts a commercial run. Moreover, remaining insurance claims of B1.7bn may be recognized in 2H15, while there are also profit from land sale and stock gain; all of which we have still not included in our forecast. 

 

- Top pick of the year with new profit base. BUY reiterated

2015 fair value is B5.20. We reiterate BUY. IRPC tends to grow strongly on a new profit base after the Phoenix project is complete; 2015 and 2016 P/E ratio would drop to 11.5x and 10.3x, respectively.