PTT

PTT Plc

- Q1 2013’s profit to surge 50.4%qoq from PTTEP and refinery and petrochemical
We estimate 1Q13’s net profit of PTT at B34.1bn, increasing as much as
50.4%qoq due mainly to subsidiaries and FX gain recognition. 1) PTTEP posted
1Q13’s net profit increasing 47.1%qoq to B20.3bn, mainly as a result of a
significant decrease in production cost. 2) Profit from refinery and petrochemical
business through subsidiaries such as TOP, PTTGC, SRPC, IRPC, and BCP is
projected to increase from the previous quarter along with market GRM that has
risen following wider finished oil spread. In spite of a stock loss and LCM from a
US$1/bbl decrease in crude oil price at end-1Q13 from end-4Q12, net GRM in
1Q13 would still increase by US$1-2/bbl from the prior quarter. Likewise,
petrochemical price and spread in 1Q13 have still increased for both olefins and
aromatics lines. Consequently, overall profit sharing from the subsidiaries in
1Q13 would skyrocket 108.8%qoq to B16.6bn. 3) The company would book a
148%qoq increase in the FX gain as a result of the Baht appreciation of 4.2%
from end-4Q12 (PTT has a Dollar debt of around US$3.29bn and a Yen debt of
23bn Yen). Accordingly, 1Q13’s net profit would comprise 28.8% of our FY2013’s
earnings forecast.
- Cut 2013-2014’s forecast to reflect previously decreased subsidiaries profit
We slash the profit forecast for FY2013-2014, as shown in the table, to reflect
our previous down revision of the profit forecasts of the petrochemical business
of subsidiaries. Petrochemical price and spread are projected to be lower than
expected due to the vague recovery of global economy, especially of China, the
world’s major petrochemical consumer, that made overall demands only stay flat
from end-2012 against a projection for a significant rebound since 1H13.
However, we believe petrochemical price and spread in 2013 would surely widen
from 2012. The economic rebound in 2H13 would be a key factor to boost the
demands. At the same time, norm profit in 2Q13 would decrease due to the
following reasons. 1) Average petroleum and petrochemical selling prices are
anticipated to drop from 1Q13 if the prices remain low in the rest of 2Q12 like
present, and the refinery business might face a significant stock loss as well. 2)
PTTGC and TOP have planned for a 60-day and 15-day maintenance shutdown,
respectively. 3) PTTEP might have to recognize an extraordinary expense for
impairment of Montara project in Australia due to a postponement of the
project’s commercial run from February to late May 2013.
- New 2013’s fair value is B398.8. Buy for long-term investment
Under the new forecast, 2013’s fair value, using DCF and sum of the parts, is
B398.8/share (from B434/share). We reiterate our BUY recommendation due to
strong business potential of PTT and its subsidiaries while the share price has
been laggard among peers. Moreover, dividend yield is expected at 4% p.a. on
average.