Morgan Stanley has reiterated its “Overweight” rating and set a target price of Bt58.00 for Thai Oil Public Company Limited (SET: TOP), following a strong first-quarter performance that beat expectations and shifting crude sourcing patterns.
In the first quarter, 91% of TOP’s crude was sourced from the Middle East. However, this reliance has significantly decreased in April and May to 34-35% of the monthly total. Meanwhile, West Asian crude intake surged to 26-52% during these months, up from just 1% in Q1. Sourcing from South and North America also increased in May, accounting for 20% and 15% of the company’s crude intake, respectively.
TOP projects its second-quarter gross refining margin (GRM) at US$13.3 per barrel, but expects the figure to moderate to US$1.4 per barrel in the third quarter, with an estimated average of US$8.6 per barrel for the year 2026.
Rising crude sourcing costs are anticipated to spike nearly threefold quarter-on-quarter to around US$20 per barrel, before easing in the second half of 2026. Meanwhile, TOP’s net debt—factoring in working capital support from PTT—declined by 18% to US$3.1 billion in US dollar terms as improved margins accelerated the company’s deleveraging process.
Meanwhile, Kiatnakin Phatra Securities has also reiterated its ‘Buy’ rating on TOP with a price objective of THB 57.10, following a robust set of 1Q26 results.
The company posted a net profit after tax of THB 19.5 billion in the first quarter of 2026, a substantial jump from THB 2.5 billion in the preceding quarter. The performance was driven primarily by an exceptional stock gain of THB 16.8 billion (US$25.3 per barrel), alongside a forex gain of THB 2 billion and a THB 2.4 billion gain from a bond buyback. These were partially offset by realized and unrealized hedging losses totaling THB 8.9 billion.
The refining division remained the key driver, with its gross integrated margin (GIM) rising US$3.3/bbl quarter-on-quarter to US$12.6/bbl. Thai Oil benefited from a spike in crack spreads during March and maintained a strong run rate of 113%.
Aromatics GIM stayed flat at US$1.1/bbl, while lube GIM weakened to US$1.1/bbl, down US$0.4/bbl QoQ. Total cash operating expenses normalized to US$1.9/bbl, with net debt to equity falling to 0.2x at end-1Q26, and net debt to EBITDA dropping to 1.0x.
The resumption of SBM-2 after a yearlong shutdown post oil spill incident is set to result in freight cost savings of US$0.5/bbl from 2026 onwards. Despite the ongoing global crude oil shortfall, Thai Oil has secured supplies from non-Middle East sources and plans to maintain refinery utilization at 113% in the second quarter.
Looking ahead, Thai Oil expects a strong 2Q26 gross refining margin (GRM) of US$13.3/bbl, aided by a spike in crack spreads, but projects market GRM will drop to US$1.4/bbl in 3Q26 as crack spreads normalize and crude premiums stay elevated. A potential stock loss of US$12.8/bbl is anticipated in the third quarter. Nevertheless, the analyst maintains a Buy rating, highlighting attractive valuation and high dividend yield prospects.
