The Bangchak Petroleum

The Bangchak Petroleum Plc (BCP)

Q1 2013’s profit to surge 14.7%qoq, driven by increasing production
We estimate 1Q13’s net profit of BCP at B1.315bn, increasing 14.7%qoq mainly
from following contributions. 1) The refinery utilization rate is projected to
increase to 99,000 bbls a day from 85,000 in the previous quarter in spite of a
19-day unplanned shutdown (between 14 March – 1 April 2013) of a vacuum
distillation unit and hydrocracking unit. 2) Total GRM is projected to stand at
US$10.5/bbl, up from US$9.66 in the prior quarter. The market GRM in 1Q13
would decrease to US$7.25/bbl from US$10.64 due to the above-mentioned
unplanned shutdown, which would result in the company producing finished oil
via a simple refinery system (fuel oil product will increase, but high-quality oil
product will decrease). However, there will be compensation from an inventory
gain of around US$2.41/bbl, versus an inventory loss of US$2.22/bbl in the
previous quarter, and a profit from hedging of US$0.84/bbl. 3) The company
would recognize an additional profit from a solar power business as the first
unit of the solar power plant phase 2 with a capacity of 16 MW has commenced
a commercial run since 6 March 2013 (the 2 other units of 16 MW in total
would commercially start on 5 April 2013). 4) There would be a FX gain of
B260m from the Baht appreciation of 4.24% from end-4Q12. 5) Corporate
income tax has decreased to 20% from 23% in the prior year. Overall, 1Q13’s
net profit would comprise 24.1% of our FY2013’s earnings forecast.
Q2 2013’s profit to continue rising qoq, thanks to sales volume and GRM
The norm profit in 2Q13 is also anticipated to remain in an uptrend from 1Q13,
with the increasing production capacity from the refinery as a key driving
factor. The refinery utilization rate in 2Q13 would be able to stand above
100,000/day because the refinery unit that was shut down in late 1Q13 would
then resume its normal operation as well as the hydrocracking unit (which
means the volume of high-quality oil product would increase). As a result, the
market GRM would return to stand high at US$8-9/bbl on average (under an
assumption for GRM in 2Q13 to stabilize at a high level close to that of 1Q13
because of a driving season). Moreover, the company would fully realize profits
from the 2 phases of the solar power plant for the first quarter. In addition,
there would be extraordinary items – remaining property damage claims of
B500m and business interruption claims (which are estimated preliminarily at
B300m; under a conservative method, we have still not included the
extraordinary profit in our forecast). For overall 2013, the profit growth of
27.7% is still foreseen.
BUY. More stable profit growth foreseen in next 1-2 years
2013’s fair value at end-2013, using DCF, is B50/share. We reiterate our BUY
recommendation. Continuous and stable growth is foreseen in the next 1-2
years after the company has gradually recognized income from the solar power
plant. PER in 2013 is 9.9x, which is still lower than the regional average of 12x.