Thai Oil PCL: Lack of near-term catalysts
- Expect 4Q24F net profit at THB1.82bn (-38% y/y, recovered from net loss q/q), lifted by minimal inventory impact and crack spread recovery
- Market GRM estimated at USD5.1/bbl (-29% y/y, +38% q/q), still above breakeven cash level of USD2.9/bbl
- Bearish chemical outlook ahead, hit by weak demand and slow spending
- Maintain FULLY VALUED with FY25F TP of THB24
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Disregarding inventory impact, we estimate market GRM at USD5.1/bbl (-29% y/y, +38% q/q), above the breakeven cash cost of c.USD2.9/bbl.
4Q24F key operating metrics
- Refinery utilisation rate is expected at 113% (vs. 111% in 4Q23 and 113% in 3Q24), as there is no plan shutdown this quarter. On a 4Q24 basis, JET/GO/ULG/HSFO crack spreads stood at USD14.8/15.1/11.4/-2.3 per barrel (+13%/+11%/+4%/n.a. q/q). Stronger spreads were supported by travel season during year-end. Hence, we project market GRM at USD5.1/bbl (-29% y/y, +38% q/q).
- We expect TOP to book a gross inventory loss of c.THB2.0bn/USD-2.1/bbl (vs. 4Q23’s loss of THB5.17bn and 3Q24’s loss of THB7.47bn) after the monthly moving average Dubai price dropped by c.USD0.9/bbl. In addition, there was a net gain of c.THB50mn from crack spread hedging and c.THB2.0bn NRV reversal from 3Q24.
- The aromatics utilisation rate is projected at 80% (vs. 79% in 4Q23 and 83% in 3Q24). On a 4Q24 basis, PX and BZ margins stood at USD116/tonne (-42% y/y, -27% q/q) and USD175/tonne (+146% y/y, -23% q/q), respectively. The q/q deterioration in spreads was hit by a) slow downstream demand (PTA/PET for polyester segment), and b) slow Chinese spending on luxury and durable goods such as auto. Hence, aromatics market GIM contribution is targeted at USD1.0/bbl (flat y/y, -20% q/q).
- Lube base utilisation rate is expected at 80% (vs. 76% in 3Q23 and 86% in 3Q24). The 500SN margin stood at US568/tonne (+9% y/y, +4% q/q). The increase was thanks to the downtrend of feedstock cost and fuel oil price. Market GIM contribution is projected at USD1.0/bbl (+100% y/y, +100% q/q).
- Accounting GIM – including crude inventory impact – is estimated at USD5.1/bbl (vs. 4Q23 of USD3.6/bbl and 3Q24 of USD0.0/bbl), significantly above the breakeven level of c.USD4.2/bbl (operating cash cost/interest expense/depreciation expenses of USD2.3/0.5/1.4 per barrel).
- Extraordinary items in 4Q24F included a forex loss of c.THB600mn as the THB appreciated against the USD by more than THB1.5 per USD.
2025F outlook
(-) Expect softer crack spread ahead. We expect softer refinery margins y/y in 2025F, with demand in China (c.20% of global motor oil consumption) showing slow signs of recovery. Weaker projected demand is supported by i) slow demand in China and Europe, ii) uptrend of motor inventory in OECD countries, and iii) additional refining capacity (mainly from China) as high as c.1.4mbd. As a result, we conservatively expect Singapore GRM at c.USD4.0/bbl for 2025F, falling from 2024’s USD4.5/bbl.
(-) Net refinery capacity of 1.4mbd to be added in 2025F. In addition to slow oil demand growth projection, refinery margins will be under pressure from the net additional refining capacity of c.1.4mbd set to come online in 2025F (vs. the previous estimate of c.1.0mbd due to hangover capacity from 2024). Most of the new capacity will be added from Africa and the Middle East. Note that we notice many cut runs among Asian refineries as margins slump on the back of the supply surplus in the middle distillate sector (mainly diesel).
Moreover, we expect increasing export volumes for gasoline and middle distillate products from China and Al Zour (Kuwait refinery) 4Q24F onward, which could weigh down margins, holding other factors constant.
However, we deem crack spread movement in 2025F to be different than in 2024 (which was in the same direction across refined products). We expect strong and resilient middle distillate spreads ahead, driven by i) motor demand recovery, ii) below five-year average reading of global inventory, and iii) relatively lower additional supply. On the other hand, we expect gasoline spread to remain under pressure from i) c.2-3mbd above five-year average inventory reading of c.25mbd, and ii) a new gasoline supply from the startup of Dangote (c.260kbd) and Olmeca (c.100kbd) plants.
(+) 1Q25F to be supported by resilient refinery. However, chemical margins continue to fall. We expect refinery crack spreads (except gasoline) to improve q/q. Our view is supported by i) seasonality during Chinese New Year where jet and gasoil demand is expected to rise. On a 1Q-to-date basis, JET/GO/ULG spreads averaged USD13.9/16.3/9.1 per barrel, -6%/+8%/-21% QTD.
However, we believe chemical margins are still under pressure from i) excess supply from China, ii) sluggish demand, and iii) slow consumer spending. On 1Q25TD basis, PX and BZ margin averaged USD113/tonne (-2% q/q) and USD143/tonne (-18% q/q).
Maintain FULLY VALUED. As we believe there will be a cost overrun for CFP project as well as a three-year project completion delay, we deem TOP has a lack of short- to near-term catalysts (unfavourable chemical outlook) with headwind risk below the CFP project’s breakeven margin. We maintain FULLY VALUED with an FY25F TP of THB26, based on an EV/EBITDA multiple of 6.0x. Our rating is supported by i) deteriorating ROE and dividend payment due to CPF’s capital intensive nature, ii) uncertainty remaining as TOP needs to find EPC, and iii) a lack of short- and near-term catalysts as we deem bearish chemical outlook and y/y softer refinery crack spreads.
FY Dec | 4Q2023 | 3Q2024 | 4Q2024F | % chg y/y | % chg q/q |
Revenue | 119,556 | 111,189 | 107,492 | (10.1) | (3.3) |
Cost of Goods Sold | (116,121) | (116,804) | (102,928) | (11.4) | (11.9) |
Gross Profit | 3,436 | (5,615) | 4,564 | 32.8 | - |
Other Oper. (Exp)/Inc | (1,149) | (966) | (1,331) | 15.8 | 37.9 |
Operating Profit | 2,287 | (6,581) | 3,233 | 41.4 | (149.1) |
Other Non Opg (Exp)/Inc | 1,242 | 686 | 600 | (51.7) | (12.6) |
Associates & JV Inc | 16.0 | (30.3) | (35.0) | - | 15.6 |
Net Interest (Exp)/Inc | (1,053) | (1,011) | (1,010) | 4.1 | 0.2 |
Exceptional Gain/(Loss) | 1,175 | 1,645 | (600) | - | (136.5) |
Pre-tax Profit | 3,667 | (5,291) | 2,189 | (40.3) | - |
Tax | (710) | 1,057 | (372) | (47.6) | (135.2) |
Minority Interest | (12.6) | 15.9 | 13.0 | - | (18.3) |
Net Profit | 2,944 | (4,218) | 1,829 | (37.9) | (143.4) |
Net profit bef Except. | 1,769 | (5,863) | 2,429 | 37.3 | (141.4) |
EBITDA | 5,562 | (3,919) | 5,985 | 7.6 | - |
Margins (%) |
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Gross Margins | 2.9 | (5.1) | 4.2 |
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Opg Profit Margins | 1.9 | (5.9) | 3.0 |
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Net Profit Margins | 2.5 | (3.8) | 1.7 |
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