Following a recent analyst meeting held to clarify the company’s strategy for mitigating the impact of surging natural gas prices driven by the ongoing conflict in the Middle East, Yuanta Securities (Thailand) has expressed a positive view on B.Grimm Power Public Company Limited (SET: BGRIM).
BGRIM has engaged in negotiations with its existing customers to communicate the challenges arising from these uncontrollable circumstances. Most customers have expressed their understanding of the situation, which has enabled the company to successfully renegotiate and adjust the electricity billing formulas for the majority of its contracts.
Currently, BGRIM’s direct industrial users (IUs) account for 22% of its total electricity sales revenue. The company anticipates that it will be able to renegotiate approximately 70% of these contracts to adopt a gas-linked tariff mechanism by May, offering partial service discounts as incentives for customers. This approach ensures that the company shoulders a reduced burden from rising gas prices compared to facing the full impact itself.
This adjustment is considered a temporary measure, and once the situation normalizes, these billing agreements can revert to the original Ft (Feed-in tariff) system. For new customers, BGRIM has adopted the gas-linked formulas from the outset.
In terms of long-term strategy, BGRIM is proceeding with its original plan to increase the proportion of renewable energy in its portfolio to help reduce earnings volatility stemming from natural gas prices. The company aims to boost the share of renewable energy from the current 37% of its 4,664 MW installed capacity to not less than 50% of its targeted 10,000 MW total installed capacity by 2030.
From Yuanta Securities (Thailand)’s perspective, if BGRIM achieves its plan, the proportion of customers not operating under gas-linked contracts will decrease to just 7%. The company is also continuing efforts to adjust agreements for this remaining customer segment, potentially limiting the impact on profits.
Previously, every 1-baht increase in natural gas prices reduced net profit by approximately THB 20–22 million. With the revised billing formulas, Yuanta estimates this impact will fall to no more than THB 10 million per 1-baht increase in gas prices.
The brokerage stated that gas prices from May to August are projected to rise by approximately THB 90. Should the situation persist for the entire year, BGRIM’s target price could decline to approximately THB 15 per share.
Nevertheless, BGRIM’s sensitivity to natural gas price fluctuations is expected to decrease by more than half compared to before. Since the outbreak of the conflict in the Middle East, BGRIM’s share price has dropped to as low as THB 10.30, a decline of THB 5.00 since February 27. In Yuanta’s view, the share price should recover to around THB 13.00 to better reflect the company’s reduced risk profile due to the recent contract adjustments.
Fundamentally, BGRIM remains well-positioned to benefit from Thailand’s new Power Development Plan (PDP) and the expanding data center business. Yuanta reiterates its ‘Buy’ recommendation on the company, maintaining a target price of THB 18.40 per share, pending further clarity on the Middle East situation.
