Tisco Picks ‘Thai Oil’ at THB60 as Refinery Margin Surges 280% in 3Q

The Singapore refinery margin marked an increase of 280% in the third quarter of 2023, which raised the market expectations for a better performance of companies in the refinery business.

The market shifted its attention to stocks like Thai Oil Public Company Limited (SET: TOP), Global Power Synergy Public Company Limited (SET: GPSC) or Star Petroleum Refining Public Company Limited (SET: SPRC) after the gross refining margin (GRM) rose from $3.44 a barrel at the end of June to $13.12 a barrel on August 2, marking a surge of 280% alone in the third quarter of this year.


Tisco Securities wrote in its research paper on August 3, citing the price from last week that rose to $8.9 a barrel, believing that the current elevated level should not be sustainable. Over the medium-term, Tisco found the historical average to be a more sustainable benchmark for GRM, expecting the Singapore benchmark GRM at USD6.2/bbl and USD6.6/bbl for 2023e-24e vs. the 10-year average of USD5.8/bbl and the USD6.5/bbl YTD.

Tisco stated that it believes current market conditions offer a short-term opportunity in Thai refinery shares, but Tisco does not see any re-rating being sustained over the medium-term. Tisco prefers TOP for its more attractive valuation and slightly bigger exposure to middle distillate products (diesel and jet fuel). Tisco has a BUY rating with TP of Bt60 on TOP, and a HOLD rating with TP of Bt11 on SPRC. Key risks include volatility in crude oil price and refined product margins.