CLSA has maintained its “Outperform” rating on Thai Oil Public Company Limited (SET: TOP) with a target price at THB 44.50 per share, despite short-term hurdles caused by the Thai government’s move to increase the ex-refinery diesel price cut from Bt2 to Bt5 per litre between April 24 and May 19, before scaling it back to Bt3 per litre.
This intervention is expected to result in a Bt2.8 billion impact on TOP’s profit and cashflow from April 9 to May 19, according to company estimates. The increased obligations, along with a Bt10 billion accounts receivable from the Oil Fund, add up to a significant liquidity burden totaling Bt30.8 billion. While TOP is seen as having sufficient resources to meet these needs, there is an associated increase in interest expenses.
The report notes that the price intervention may push TOP into a loss in 2Q26 if the Bt3 per litre price cut extends throughout the quarter. Despite currently high gross refining margins (GRM), much of the benefit is offset by volatile crude premiums and higher shipping costs, with April’s effective GRM estimated at just US$15 per barrel. Government measures have the effect of erasing nearly US$10 per barrel from the GRM.
However, CLSA believes the worst of the intervention has passed, as both crude oil prices and diesel crack spreads have moderated from their peaks. The brokerage expects the government may ease price controls as market conditions normalize.
