Thai Oil Public Company Limited (TOP) is showing signs of recovery in its core earnings, according to the latest assessment by Kiatnakin Phatra Securities (KKPS). The brokerage reaffirmed its “Buy” recommendation for TOP, adjusting the 12-month price objective slightly downward by 2.1% to THB 37.40 per share from a previous target, following a reduction in next-year earnings forecasts.
KKPS attributed the lowered price estimate to a revision in its 2025 NPAT expectation, which was trimmed by 12% to THB 12.2 billion. This updated outlook stems from a more cautious stance on gross refining margins (GRM), which were reduced from US$5.6 to US$5.0 per barrel. Despite this, KKPS remains more optimistic on TOP than the broader market, as its earnings projection still stands 22.6% above consensus.
The price target is based on a blend of valuation approaches, including price-to-earnings, price-to-book, and discounted cash flow methods. Core assumptions for refinery run rates were unchanged at 104%, reflecting planned maintenance activities.
TOP’s financial performance in the second quarter of 2025 underscored improving fundamentals. The company reported core NPAT of THB 2.6 billion, buoyed by robust plant utilization rates and stronger GRM. Market gross integrated margin rose to US$7.0 per barrel, supported by healthy contributions from aromatics and lubricants businesses. However, non-recurring items, including a stock loss and foreign exchange losses, were mostly balanced by gains from bond repurchases and a sizable negative goodwill booked from its associated acquisition activity.
The company’s high operating costs, at US$1.7 per barrel, reflected incremental expenses linked to ongoing clean fuel projects and a recent oil spill. Nonetheless, Thai Oil’s balance sheet showed improvement, with net debt to equity dropping to 0.61x at the end of June.
KKPS noted that the significant CFP risk is one of the key valuation stressors, resulting in TOP’s 2026E P/B valuation derating to 0.4x (the low end of its historical range of 0.8x). Key milestones (bond performance proceeds, which were used to pay for CFP project cost, the resumption of CFP’s work, and the appointment of new EPC contractors) and the rebound in SG GRM should ease this concern, facilitating a re-rating, in our view.
Looking ahead, management signaled a forthcoming asset monetization plan by the end of the third quarter, a measure aimed at further strengthening the company’s financial position.
