Kasikorn Securities held a recent meeting with B.Grimm Power Public Company Limited (SET: BGRIM) during which the company addressed the impact of the ongoing Middle East conflict, specifically the war involving Iran. According to company management, the overall outlook is seen as negative by Kasikorn, primarily due to higher energy costs.
A main concern highlighted by BGRIM’s executives is the anticipated rise in domestic natural gas prices. They project that average gas costs will climb to around 330 baht per mmBTU in Q2, following a significant increase in imported LNG prices resulting from heightened geopolitical tensions in the region.
Electricity costs remain another risk factor. Although the Energy Regulatory Commission (ERC) has set the electricity tariff at 3.95 baht per unit, the Energy Minister has publicly discussed the possibility of freezing the tariff to ease consumer concerns. This injects further uncertainty into BGRIM’s revenue outlook.
On the LNG import side, BGRIM plans to receive 5–6 shipments this year. Importantly, these shipments will not transit through the Strait of Hormuz, a major chokepoint affected by the conflict, which mitigates immediate supply risks for the company.
To address rising energy costs, BGRIM is currently negotiating with its industrial customer base, which accounts for 22% of revenue. The company aims to temporarily revise its pricing structure with about 70% of these customers. If gas prices exceed 350 baht per mmBTU, BGRIM intends to shift from an Ft-linked pricing model to a cost pass-through approach. Kasikorn Securities views this initiative positively, as it could help safeguard profit margins from volatile gas prices. However, analysts remain cautious, citing the challenge of securing universal agreement from industrial clients faced with higher production costs.
Kasikorn Securities maintains its “Hold” recommendation on BGRIM, with a target price of 15 baht per share.
