KGI notes in its analysis regarding B.Grimm Power Public Company Limited (SET: BGRIM) that falling energy prices have brought unexpected benefits for Small Power Producers (SPPs), a factor the market has largely overlooked. Although the government might use these cost reductions to lower electricity tariffs, the impact is expected to stabilize margins rather than diminish them outright.
With liquefied natural gas (LNG) prices dropping from $14 to $11 per mmbtu, combined with a strong baht rising to 33 against the dollar, KGI’s projections for 2025 SPP gas prices now sit below earlier estimates. Each $1/mmbtu drop can potentially reduce SPP gas prices by THB 10 and electricity tariffs by THB 0.10/kWh. The analyst estimates that average electricity tariffs will drop to THB 3.93/THB 3.70/THB 3.70/kWh between 2025 and 2027, from THB 4.18 in 2024.
On May 14, BGRIM is projected to report a first-quarter 2025 net profit of THB 630 million, a 20% decrease quarter-on-quarter but a remarkable 66% increase year-on-year. Quarterly earnings are expected to decline due to foreign exchange losses, compared to gains in the previous quarter.
Core profit is anticipated to hit THB 730 million, marking an impressive 123% quarter-on-quarter and 48% year-on-year increase, accounting for 36% of the analyst’s full-year 2025 forecast. This year-on-year surge is attributed to a stronger profit share and the full contribution from the Malacha hydro project.
Despite an anticipated rise in taxes due to expired BOI privileges for four SPPs, core profits are also set to grow on a quarterly basis, thanks to reduced SG&A expenses and peak season effects in Malacha.
Meanwhile, SPP margins might slip quarter-on-quarter but improve year-on-year. Gas prices have been recorded at THB 334/mmbtu, reflecting a slight increase from the previous quarter but a YoY decrease.
BGRIM’s core profits forecast for 2025-2027 has been raised by 4-16%, highlighting stronger performance from UVBGP and reduced losses from projects under construction in share of profits. These projections are 3% above market consensus for 2025 but 4-24% lower for 2026 and 2027.
Despite typical seasonal declines, BGRIM’s earnings in the second half of 2025 are expected to surpass market expectations, buoyed by declining LNG prices, though core profit may dip slightly in the second quarter due to a contracting SPP margin.
As a result, KGI has upgraded BGRIM’s rating to ‘Outperform,’ maintaining a target price of THB 13.10 per share. This reflects enhanced earnings forecasts, balancing a higher value discount for South Korean projects, which increased to 60% from 50% due to possible delays. With rapid declines in energy prices and a strong baht, the outlook for SPPs appears more favorable than anticipated.
