Kiatnakin Phatra Cheers Thai Oil’s Upbeat 1Q23 Outlook, Maintains “BUY” with TP of THB70

With earnings season now in underway, Kiatnakin Phatra Securities (KKPS) released a stock analysis of Thai Oil Pcl. (SET: TOP), expecting a strong set of 1Q23 results while maintaining its “BUY” rating and THB70.00 price target unchanged. 

Thai Oil’s core 1Q23 NPAT is expected to be strong at THB6.5 billion while an expected stock loss of THB3.5 billion (US$3.7/bbl) and a total gain (a forex gain, a hedging gain and other items) of THB870 million should bring down its reported 1Q23 NPAT to THB4.35 billion.

In 1Q23, KKPS predicted a market GIM of $11.6/bbl, up from $11.1 in 4Q22. Refining GIM should improve from $9.3/bbl in 4Q22 to $9.6/bbl in 1Q23. While crack spreads have narrowed generally, the decline in the Murban crude premium (from US$ 7.0/bbl to US$ 5.0/bbl) has helped offset this trend. As aromatics spreads strengthen QoQ, the Aromatics GIM is expected to increase from US$0.8/bbl in 4022 to US$1.0/bbl in 1023. Lube base oil should increase GIM by US$1/bbl in 1Q23. Due to the quarter’s Murban crude price drop, Thai Oil is likely to record a stock loss of US$3.7/bbl (THB3.5 billion). 

Thai Oil produced around 27.5 million barrels of fuel products in 1Q23. KKPS expects cash operating costs to normalize, falling from US$ 2.33/bbl in 4Q22 to below US$ 1.5/bbl while depreciation per unit should be relatively flat at US$ 1.5/bbl. 4Q normally sees the highest cash operating cost/unit. 

KKPS forecasts Thai Oil to record a hedging gain of THB490 million, a currency gain of THB190 million, and an LCM reversal of THB190 million. The oil refining company should maintain NPAT above its historical trend in 2023. TOP’s 2023 P/B of 0.7x and projected dividend make it attractive.