PTT Oil & Retail Business PCL: Margin squeeze and stock loss to hit 2Q25F
- 1Q25 net profit came in at THB4.37bn (+18% y/y, +46% q/q), lifted by improvement across all business units
- Marketing margin came in at THB1.02/litre (-7% y/y, +23% q/q) with 104mn cups sold (+5% y/y, +1% q/q)
- Potential marketing margin squeeze from excise tax hike of THB1.0/litre
- Maintain HOLD with a TP of THB13
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Net marketing margin came in at THB1.02/litre (-7% y/y, +23% q/q) while total coffee cups sold stood at 104mn (+5% y/y, +1% q/q). Normal profit, excluding inventory impact, came in at THB3.88bn (+36% y/y, +113% q/q).
1Q25 key operating matrix
- Mobility business: Total retail oil sales volumes came in at 2,536mn litres (-3% y/y, -4% q/q) whereas wholesale fuel volumes registered 4,172mn litres (+7% y/y, -6% q/q). The q/q decline was no thanks to the off-peak season after the new year and slower wholesales volume of diesel and fuel oil. Note that service stations increased by 84 stations y/y and three stations q/q. OR boasted a market share of 40.4% in this quarter.
Market margin (MKM) was THB1.02/litre (+11% y/y, +63% q/q). The increase was attributed to widening jet margins and diesel. However, this is partly offset by an inventory loss impact of c.THB125mn (vs. 1Q24’s gain of c.THB330mn and 4Q24’s loss of c.THB40mn). - Lifestyle business: Revenue came in at THB5.91bn (+1% y/y, -6% q/q). The q/q decline was due to a drop in revenue from equipment and raw material sold to franchisees. The number of Café Amazon outlets increased by 286 y/y and 45 q/q. Total cups of coffee sold stood at 104mn (+5% y/y, +1% q/q).
EBITDA came in at THB1.76bn (+11% y/y, +10% q/q) with an EBITDA margin of 29.9% (vs. 27.2% in 1Q24 and 25.5% in 4Q24). The stronger profitability was thanks to the decrease in SG&A expenses from the discontinued business (Texas Chicken, in 3Q24). - Global business: Petroleum sales volume came in at 593mn litres (+32% y/y, +15% q/q), while total cups of coffee sold averaged 7.7mn (+10% y/y, flat q/q). The y/y jump in petroleum sales volume was lifted by stronger demand of diesel, fuel oil, and jet oil in the Philippines, Cambodia, and Laos. Moreover, the y/y higher number of coffee cups sold was from Café Amazon expanding by 15 outlets y/y and two outlets q/q to 391.
- Extra items in 1Q25 included a) an oil hedging loss of THB77mn, b) a gain on financial instrument of THB238mn, and c) a reversal of credit loss from receivable of THB460mn.
2Q25F outlook
(-) Mobility business: Limited impact to marketing margin after maximum THB1.0/litre excise tax hike, thanks to oil price downtrend. Oil Fuel Fund Office (OFFO) announced it would raise excise tax (maximum THB1.0/litre) on both retail diesel and gasoline, effective 7 May 2025. However, OFFO also stated that the excise tax hike will not affect retail prices for diesel and gasoline.
However, upon perusing reference retail prices from the EPPO website, it was evident that marketing margin dropped by THB0.3-0.5/litre before and after the effective date on 7 May. Thanks to the crude oil price downtrend, the marketing margin squeeze has not taken the full impact from the excise tax hike of THB1.0/litre.
After a sensitivity analysis of the change in marketing margin on profitability, it was found that for every THB0.1/litre change in marketing margin of retail oil product of diesel and gasoline, net profit will change by c.THB1.26bn a year. This is based on an assumption of i) annual sales of diesel and gasoline of c.15,000mn litres, and ii) corporate income tax of 20%, holding other factors constant.
Moreover, we also expect margin downtrend from the promotion campaign on oil discount (THB3.0/litre for gasohol 95 super power and THB0.5/litres for regular gasoline and other gasohol for PTT Blue Plus card member from 1 Apr to 30 Jun 2025). However, we expect softer margin to be offset by a boost in sales volume.
(+/-) Lifestyle business: Slight improvement expected q/q. We expect the lifestyle business performance to slightly improve q/q. First, we expect OR to efficiently keep SG&A expenses low from 1Q25, thanks to the discontinuity of unprofitable businesses. For Café Amazon, we expect the cost of coffee seed to be manageable in 1H25F as OR has sufficient inventory. However, we expect a rise in Café Amazon’s COGS in 2H25F, given the tight supply in Brazil and Vietnam. Note that coffee seed accounts for c.30% of Café Amazon COGS.
Maintain HOLD with an FY25F TP of THB13, based on a DCF valuation with a WACC of 10.33% and terminal growth rate of 1%. Our rating is on the back of i) expectations of softer core 2Q25F performance, pressured by margin squeeze from the excise tax hike; ii) potential margin squeeze from lifestyle business should OR be unable to raise coffee price (as coffee bean from Brazil costs rise), and iii) a lack of key catalysts in the short term, with no clear synergy benefits for the company’s recent acquisitions (KNEX – Otteri Wash & Dry, Frshket – food supply chain service, KAMU – milk tea beverage, Traveloka – digital platform service provider for travel and leisure, Gowabi – digital platform service provider for healthcare and wellness, Found&Found – beauty business).
FY Dec | 1Q2024 | 4Q2024 | 1Q2025 | % chg y/y | % chg q/q |
Revenue | 177,867 | 185,971 | 182,422 | 2.6 | (1.9) |
Cost of Goods Sold | (167,319) | (177,779) | (172,787) | 3.3 | (2.8) |
Gross Profit | 10,548 | 8,191 | 9,635 | (8.7) | 17.6 |
Other Oper. (Exp)/Inc | (7,159) | (6,036) | (5,276) | (26.3) | (12.6) |
Operating Profit | 3,389 | 2,156 | 4,359 | 28.6 | 102.2 |
Other Non Opg (Exp)/Inc | 1,253 | 54.2 | 495 | (60.5) | 814.1 |
Associates & JV Inc | (86.4) | 311 | 204 | nm | (34.3) |
Net Interest (Exp)/Inc | (340) | (297) | (263) | 22.6 | 11.4 |
Exceptional Gain/(Loss) | 540 | 1,217 | 622 | 15.3 | (48.9) |
Pre-tax Profit | 4,755 | 3,440 | 5,417 | 13.9 | 57.5 |
Tax | (1,032) | (440) | (1,038) | 0.5 | 136.0 |
Minority Interest | 0.75 | (1.7) | (0.3) | nm | (82.6) |
Net Profit | 3,723 | 2,999 | 4,379 | 17.6 | 46.0 |
Net profit bef Except. | 3,184 | 1,783 | 3,758 | 18.0 | 110.8 |
EBITDA | 6,351 | 4,493 | 6,910 | 8.8 | 53.8 |
Margins (%) |
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Gross Margins | 5.9 | 4.4 | 5.3 |
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Opg Profit Margins | 1.9 | 1.2 | 2.4 |
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Net Profit Margins | 2.1 | 1.6 | 2.4 |
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