Morgan Stanley has upgraded its outlook for Thailand’s refinery sector, highlighting what it calls the “Golden Age of Refining.” The investment bank raised its target prices across three major local refiners: Thai Oil (TOP) to THB 70 (from THB 58), Star Petroleum Refining (SPRC) to THB 12.9 (from THB 9.1), and Bangchak Corporation (BCP) to THB 51 (from THB 49.3), maintaining an “overweight” (OW) rating on all three.
The investment firm believes that global gross refining margins (GRM) will remain above mid-cycle levels, driven by robust demand outpacing supply and a decade of underinvestment in new refinery capacity. Between 2025 and 2028, Morgan Stanley expects incremental global demand to rise by 2.5 million barrels per day (mbpd), while capacity growth will remain below 1.5 mbpd.
Supply constraints are further intensified by several factors: the closure of 2–3 mbpd of Russian refining capacity, shutdowns in Japanese and OECD refineries, and reduced export quotas for China’s “Teapot” refiners. Building new refineries requires a significant investment—an estimated US$12 billion for a 400,000 bpd facility and an average payback period of 16 years. Globally, more than US$250 billion in investment is needed to meet future demand, but only US$70 billion has been committed so far.
Morgan Stanley projects GRMs will be 20-25% higher than the mid-cycle average, with forecasts of US$14.3 in 2026, US$12 in 2027, and US$10.5 in 2028, with utilization rates of 81-82.5%. The firm has also increased EPS estimates for refinery stocks by 30-50%, citing structural support for margins, especially for complex Asian refiners that invested countercyclically over the past decade. Morgan Stanley prefers Indian, Thai, and South Korean refiners due to these advantages.
