Kasikorn Securities (KS) stated that on April 30, Thai Oil Public Company Limited (SET: TOP) had sent a letter informing customers that the company may need to reduce refinery utilization rates, mainly due to storage space limitations and the impact of government measures prohibiting the export of refined oil products.
Following an inquiry to TOP’s management, the analyst firm received confirmation that the issue is true. However, at present, the company has not yet reduced its production capacity and is still operating at 110%. If the situation forces a production cut, the impact can be assessed in two scenarios:
Scenario 1: If the government continues to prohibit the export of both diesel and jet fuel, the company would need to reduce capacity to 85-90%, which is estimated to financially impact the company by approximately THB 370 million per day.
Scenario 2: If the government allows the export of jet fuel but continues to prohibit diesel exports, the estimated impact on the company would be about THB 185 million per day.
Furthermore, the brokerage estimated that TOP will be the first refinery required to implement production cuts, as its jet fuel output accounts for about 20% and diesel for 37% of total production capacity. Other refineries may be affected subsequently, particularly those using hydrocracker processing, such as PTT Global Chemical Public Company Limited (SET: PTTGC) and Bangchak Corporation Public Company Limited (SET: BCP).
Given all the aforementioned pressures, Kasikorn believed that this will generate negative sentiment towards TOP’s share price in the short term. Investors are therefore advised to exercise caution when investing at this time.
