CLSA Securities predicted a challenging quarter for Thai refiners in 2Q23 due to the global slowdown’s impact on gross refinery margin (GRM), but GRM should rebound in the second half of the year due to lowered crude premium and improving demand.
The brokerage firm expects Thai Oil Pcl. (SET: TOP) to report a 98% annual decline in the second quarter, from THB4.6 billion in 1Q23 to THB478 million in April-June period, as a result of the impact of the global downturn on GRM.
This was the outcome of the gross refinery margin declining by more than half from QoQ to US$4.5/bbl from US$10.0/bbl, according to CLSA, which also predicted that falling crude oil prices due to the global economic slowdown would end up in a THB1.9 billion stock loss.
A weak Thai baht against the U.S. dollar also weighed on earnings, as it is anticipated to incur a THB1.0 billion foreign exchange loss.
CLSA forecasts that TOP would report a hedging gain of THB500 million in 2Q23 due to narrowing diesel crack spreads. Weak PX and BZ spreads are expected to keep the refinery run rate around 70%, up from 67% in 1Q23.
Due to Chandra Asri Petrochemical’s (CAP) insurance income in 1Q23, the company’s equity income is expected to fall from THB101 million profit to THB50 million profit in 2Q.
The brokerge predicts an increase in crack spreads in the third quarter of 2023 as a result of increased demand for diesel, gasoline, and jet fuel, bringing the GRM to US$5.5/bbl. CLSA has a “Buy” rating and a THB70.0 price target on TOP shares despite the company’s flagged grim 2Q23 profits, expecting petrochemical CAP to contribute to increasing equity income in 2H23 driven by improving demand.