FSSIA Ranks ESSO as Top Pick in Thai Refinery Sector, Recomm. “BUY” with TP of THB12.9

Mr. Songklod Wongchai, Executive Vice President of FSS International Investment Advisory Securities Co., Ltd. (FSSIA), maintains a “BUY” recommendation on Esso Thailand Pcl. (SET: ESSO) with a target price of THB12.9, as net profit growth momentum would accelerate at the highest rate among six Thai refiners due to its integrated refinery-oil station value chain, superior crude procurement, and timely shutdown of the aromatics unit.


According to the firm management, following the company’s post-1Q22 results conference call, it is expected net profit growth in 2022 owing to support of 1. ESSO does not have any hedge positions, making it able to fully benefit from the current high GRM industry, 2. ESSO plans to maximize its utilization rate by over 80% in 2Q22, up from 70% in 1Q22 owing to its prompt shutdown of the aromatics unit in June-21 to allow ESSO to maximize its gasoline yield, and 3. ESSO intends to raise its sales volumes for retail oil stations, the commercial segment, and exports, as the currently high GRM makes ESSO’s refinery operation rate effectively run at 80-85%.


ESSO’s market GRM is predicted to climb from USD9/bbl in 1Q22 to USD15-17/bbl in 2Q22, with an accounting GRM of USD20-22/bbl. The key drivers would be the considerable rises in margins of gasoline (28% yield in 1Q22), diesel (46%), and jet (3%), as ESSO could grow its production yield of gasoline to 30%, diesel to 48-50%, and jet to 5% based on its historical track record. FSSIA expects ESSO’s core net profit from the refinery unit would be THB3-4 billion in 2Q22, up from THB1.5 billion in 1Q22.


The share price of ESSO ended the week with a 4% gain to close at THB9.95/share and a trading value of THB411 million.