KGI Raises ‘Thai Oil’ Target Price to THB68 with Outlook on High Refinery Margin and Crude Run

The oil spill in early September has pushed the share price of Thai Oil Public Company Limited (SET: TOP) below THB50 mark for the first time in more than a month as the price has been hovering slightly higher the mark throughout August. 


All analysts were saying that the spill will have a limited impact on TOP with its good management on the incident. However, there was one particular securities company that not only had a positive view on the company, but also raised the target price for TOP to as high as THB68.00 per share.


KGI Securities (KGI) upgraded its earnings projections for TOP by 46% to Bt20.8bn in 2023F and 22% to Bt17.5bn in 2024F mainly thanks to better refinery margin and slightly higher crude run. In addition, KGI rolled over and upgraded its1H24F target price to Bt68.00, from Bt62.00, to reflect the earnings upgrades, based on 6.5x EV/EBITDA and 5% discount related to the oil spill on ESG criteria. 

The brokerage firm reiterated a rating of Outperform on TOP thanks to i) anticipated materially higher earnings in 3Q23F, ii) consistently healthy refinery margin in 4Q23F from peak seasonal demand for diesel in the winter, and iii) expected interesting dividend yields of 7.5% and 6.3% in 2023F-2024F, respectively. 

Lastly, KGI added TOP back into its Energy portfolio of top picks after the company did a good job managing the oil spill.


KGI noted that it had a positive view on the company’s management of the oil spill that occurred on September 3, especially the proactive use of the oil boom around the crude vessel during the oil discharge at Single Buoy Mooring 2 (SBM-2). Most of the leak went into the oil boom and only a small amount made it to the sea. This made it easier for the company to clean up and collect the spilled oil, while there was less impact on the environment and less cleaning costs. 

KGI preliminarily estimated extra expense of about Bt1.0bn from the oil spill, which would be less than Star Petroleum Refining (SET: SPRC)’s oil leak on January 25, 2022, as none of the oil spill reached any beaches or coast lines in TOP’s case. Note that SPRC booked a provision of US$42mn for its oil leak in 1Q22.