Bangchak Petroleum

Bangchak Petroleum Plc (BCP)
Q2 2013’s net profit to decrease only 44%qoq, thanks to insurance claims

We project 2Q13’s net profit of BCP at B1.22bn, decreasing 44%qoq. However,
the norm profit is estimated to plunge as much as 75.6%qoq to stand at only
B498bn. The main reason that has prevented the net profit from a severe fall is
the remaining insurance claims of B500m for property damage and B850m for
business interruption. Excluding the aforementioned items, fundamental factors
that would depress the norm profit in this quarter are as follows. 1) Refinery
utilization rate is projected to be reduced 4%qoq to 96,000 barrel/day because
of an unplanned shutdown in early 2Q13. 2) Market GRM is anticipated to plunge
24.7%qoq to US$6/barrel, along with global GRM. Moreover, as refinery
utilization rate has still not been stable after the repair from fire accident, the
refining units sometimes have to run hydroskimming production (which would
result in a small proportion of high value products). 3) There would be a great
stock loss of US$5/barrel from the crude oil price that has declined to only
US$101/barrel at end-2Q13 from US$108/barrel at end-1Q13. Combined with
the aforementioned unplanned shutdown, the crude stock in 2Q13 would
increase 13.5%qoq to 5.9 million barrel. 4) The company would book a Fx loss of
around B356m from the Baht depreciation of 6.1%qoq. However, there are still
following supporting factors in 2Q13. 1) Marketing margin would shift 20%qoq to
B0.60/liter, which would compensate for a slight fall of 1.6%qoq in sales, so the
profit sharing from the marketing business would increase. 2) The company
would recognize more income from a solar power plant because the solar farm
phase 2 with total capacity of 32 MW has run at a full capacity for the first
quarter. Overall, 1H13’s net profit is estimated at B3.4bn, increasing 66.5%
from the same period last year and accounting for 62.7% of our FY2013’s
forecast.
- Norm profit to grow again in 2H13, brightening FY2013’s profit
Preliminarily, we maintain our net profit forecast for FY2013, projecting the norm
profit in 2H13 to grow from 1H13 due to following contributions. 1) GRM is
projected to rise on seasonal effect of the U.S. driving season and Ramadan in
Indonesia (in 3Q13 throughout 4Q13). 2) Dubai crude oil price in 2H13 would be
able to stand above US$100/barrel along with the economic recovery, especially
of the US in 2H13 that would boost an oil demand and prevent a high stock loss
like it was in 1Q13. 3) The refinery would resume its operation at a higher
utilization rate of around 110,000 barrel a day after an unplanned shutdown in
1H13 that depressed the daily utilization rate below 100,000 barrel. 4) Share of
profit from the marketing business would increase because the 3Q and 4Q of
every year is a high season for oil selling that usually boosts the sales. 5) The
company would book an income from the solar power plant, both Phase 1 and 2
for a full quarter (the Phase 2 has just commenced the production in
2Q13).Overall, FY2013’s profit would continue growing by 27.7%yoy.
- Reiterate BUY. Profit to grow sustainably in next 1-2 years
We derive 2013’s fair value, using DCF, at B50/share. Buy recommendation is
reiterated. Continued and sustainable profit growth is still foreseen in the next 1-
2 years after the company recognizes an income from the solar power plant
according to additional power purchase agreement. Moreover, there would also
be a positive factor from new investment expansion plan in 2013.