KGI Securities is bullish on Thai refinery stocks on higher 4Q22 performance following rising refining margin with stronger demand from China after lifting Covid-19 restrictions.
KGI stated that the Singapore GRM soared 30% WoW to US$8.7/bbl on the back of better gasoline, jet oil, and diesel spreads. Gasoline spread inched up 5% WoW to US$11.9/bbl, supported by strong demand in Australia during holiday season, despite still high gasoline export from China. Jet oil and diesel spreads also climbed 15% WoW to US$33.2/bbl and 16% WoW to US$37.6/bbl, respectively, since the global aviation demand has been increasing, while diesel demand has been buoyed by i) potential gas-to-oil switching during the winter due to high gas prices and ii) China’s demand recovery as it relaxes COVID-19 restrictions. Thus, KGI maintained its projection for refinery margin in Thailand to improve QoQ in 4Q22F as a result of higher jet oil and diesel spreads as well as lower crude premium cost.
KGI noted that it still prefers the refinery industry, including Star Petroleum Refining Public Company Limited (SET: SPRC), Thai Oil Public Company Limited (SET: TOP), and Bangchak Corporation Public Company Limited (SET: BCP).