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Monday, April 27, 2015
1Q15 Earnings Preview
Thai Oil
TOP
Rec. : HOLD
1Q15 profit to make year’s high
We revise up our profit forecast and fair value to reflect better-than-expected GRM as
a result of significantly decreasing cost. However, the share price likely has risen in
advance from the positive factor until fully valued. We recommend HOLD.
 1Q15 profit to make year’s high
We project TOP to show net profit of B4.3bn in 1Q15, rebounding from net
loss of B6.5bn in 4Q14 as a result of the following factors. 1) There would
be stock gain (LCM included) of around B1.1bn in 1Q15, compared with
stock loss (LCM included) of B12bn in the prior quarter. 2) Market GRM is
projected to increase 6.0%qoq on seasonal effect. 3) Due to BOI tax
benefit, TOP will not have to pay tax on the refinery business in 1Q15. 4)
There would be Fx gain of B490m, compared with Fx loss of B548m in the
prior quarter. However, TOP’s profit would still be affected by the aromatics
business; TPX would face net loss in this quarter from decreasing spreads
and utilization rate. Overall, 1Q15 net profit of TOP is estimated to comprise
61% of our initial FY2015 forecast.
 Up 2015-2016 forecast to reflect decreasing cost
Current Price (B): 56.00
Target Price (B): 54.00
Upside : -3.5%
Dividend Yield : 4.0%
Total Return : 0.5%
Market Cap. (Bm) : 114,241.56
CG Score:
Technical Chart
We revise up our FY2015-2016 profit forecast, as shown in the table,
increasing GRM assumption from US$4.5/barrel to US$5.5/barrel in 2015
and US$5/barrel in 2016 to reflect benefit from significantly lower fuel loss
and premium as a result of decreasing crude oil prices. However, in the
short term, normalized profit in 2Q15 would weaken slightly from 1Q15 as
GRM would lower after passing winter; TOP’s normalized profit in 2H15
would show a significant decline from 1H15 because of 1) a low season of
refinery and 2) significantly increasing finished oil supply from new
refineries and new Px supply.
 New FV is B54; share price already fully valued. HOLD
ASP vs IAA concensus
Under the new forecast, new 2015 fair value (DCF) is B54 (B48 previously).
We reiterate to hold TOP for dividend; the share price likely has already
risen in response to all positive factors and the profit likely has possibly
made a year’s peak in 1Q15.
Key Data
FY: Dec 31
Sales (Bm)
Net Profit (Bm)
Norm. Profit (Bm)
EPS (B)
PER (x)
DPS (B)
Dividend Yield (%)
BVS (B)
PBV (x)
ROE (%)
Source : ASP Research
FY12A
447,432
12,320
9,443
6.04
9.2
2.70
4.9
42.42
1.3
14.8
FY13A
414,575
9,316
10,772
4.57
12.2
2.06
3.7
44.57
1.2
10.5
FY14A
390,090
-4,026
-6,597
-1.97
n.m.
1.16
2.1
40.54
1.4
-4.6
FY15F
456,575
10,140
10,140
4.97
11.2
2.24
4.0
50.62
1.1
10.9
FY16F
500,017
12,084
12,084
5.92
9.4
2.67
4.8
52.76
1.1
11.5
EPS (B)
ASP
Cons
2015F
4.97
4.97
%diff
0%
2016F
5.92
4.58
29%
Source: IAA concensus and ASP
Nalinrat Kittikumpolrat
License No.: 018350
[email protected]
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
 1Q15 profit to make year’s high
We project TOP to show net profit of B4.3bn in 1Q15, rebounding from net
loss of B6.5bn in 4Q14 as a result of the following factors. 1) Stock loss
would decrease from US$11.7/barrel in 4Q14 to US$1.6/barrel, while there
will also be a reversal of LCM loss to US$2.7/barrel gain in this quarter, so
total stock gain (LCM included) is projected around US$1/barrel or B1.1bn
in 1Q15, compared with stock loss (LCM included) of B12bn in the prior
quarter. 2) Market GRM is projected to increase 6.0%qoq on seasonal effect
to US$8.7/barrel, mainly because crack spreads of ULG95 and fuel oil have
widened around US$1.9/barrel and US$3.7/barrel from the prior quarter. 3)
Due to remaining BOI tax benefit of B3.2bn at the end of 2014 from the
investment on environment prevention program, TOP will not have to pay
tax on the refinery business in 1Q15. 4) There would be Fx gain of B490m,
compared with Fx loss of B548m in the prior quarter. However, TOP’s profit
would still be adversely affected by the aromatics business; product spreads
have decreased, especially that of Bz which declined as much as 52.6%qoq
to US$98/ton; the narrower spread has also caused TPX’s utilization rate to
lower from 89% to 66%. As a result, product to feed margin of the aromatic
business has decreased around 31.8%qoq to US$15/ton, causing TPX to
face net loss of around B786m in this quarter. Overall, 1Q15 net profit of
TOP is estimated to comprise 61% of initial FY2015 forecast.
 Up 2015-2016 forecast to reflect decreasing cost
We revise up our FY2015-2016 profit forecast, as shown in the table,
increasing GRM assumption from US$4.5/barrel to US$5.5/barrel in 2015
and US$5/barrel in 2016 to reflect benefit from significantly lower fuel loss
and premium as a result of decreasing crude oil prices. Accordingly, we
project TOP to be able to rebound from net loss of B4bn in 2014 to net
profit of B10bn in 2015 and to grow further by 19.2%yoy in 2016.
 Profit to weaken continually in the rest of 2015
For the rest of 2015, we project 2Q15 normalized profit to weaken slightly
from 1Q15 as GRM would lower after passing winter. Yet, normalized profit
would remain high due to an annual turnaround of many refineries
worldwide and gasoline stocking for the U.S. driving season, as well as an
annual turnaround of aromatics factories in 2Q15 which would help widen
product spreads temporarily. However, TOP’s normalized profit in 2H15
would show a significant decline from 1H15 because of the following
reasons. 1) It is a low season of refineries as finished oil demands would
decrease. 2) There is new supply of finished oil from three new refineries in
the Middle East with combined daily production capacity of 1.2 million
barrels; although a daily supply would decrease around 400,000 barrels in
total from a permanent shutdown of three existing refineries in Australia,
Japan, and Taiwan, net new supply is still 800,000 barrels a day, versus
only 490,000 barrels a day in 2014. 3) New Px supply of 2.6 million tons a
year will enter the market in 2H15; though the new supply lowers from 7
million tons a year in 2014, it will still weaken product spread in 2H15 from
1H15.
1Q15 Earnings Preview
1Q13
2Q13
Bm
Sales
104,914 93,233
Cost of Sales
101,455 91,554
Gross Margin
3,459
1,679
EBIT
5,666
(401)
Gain from FX
1,717
(2,764)
Income Tax
(270)
(116)
Net Profit
4,363
(1,565)
Norm Profit
3,026
233
EPS (B)
2.14
(0.77)
Norm EPS (B)
1.48
0.11
Gross margin
3.3%
1.8%
Net profit margin
4.2%
-1.7%
Source : Financial Statement / ASP Research
3Q13
108,500
99,586
8,915
9,255
(249)
(555)
7,629
7,483
3.74
3.67
8.2%
7.0%
4Q13
107,928
104,947
2,981
861
(1,815)
(219)
(214)
928
(0.10)
0.45
2.8%
-0.2%
1Q14
112,228
109,828
2,400
3,755
692
(208)
2,534
1,499
1.24
0.73
2.1%
2.3%
2Q14
101,063
98,378
2,686
3,621
290
(441)
2,094
1,387
1.03
0.68
2.7%
2.1%
3Q14
88,254
90,829
(2,575)
(1,203)
561
118
(2,175)
(3,180)
(1.07)
(1.56)
-2.9%
-2.5%
4Q14
88,545
95,115
(6,570)
(6,831)
(548)
1,451
(6,479)
(6,303)
(3.18)
(3.09)
-7.4%
-7.3%
1Q15F %QoQ
%YoY
71,882 -18.8% -36.0%
67,041 -29.5% -39.0%
4,841 -173.7% 101.7%
5,391 -178.9%
43.6%
490 -189.4% -29.2%
(60)
n.m.
n.m.
4,306
n.m.
69.9%
3,818
n.m. 154.7%
2.11
1.87
6.7%
6.0%
2015F
456,575
437,680
18,894
16,320
0
2,780
10,140
10,140
2014
%YoY
390,090 17.0%
394,150 11.0%
(4,060)
n.m.
(658)
n.m.
996
n.m.
920 202.1%
(4,026)
n.m.
(6,597)
n.m.
(1.97)
(3.23)
-1.0%
-1.0%
Company and its Subsidiaries’ Operating Results
2Q58TD
1Q58
4Q57
3Q57
%QoQ
40.7%
Petroleum product price ($/bbl)
Local LPG*-DB
-17.04
-12.70
-24.20
-40.81
ULG95-DB
15.98
15.52
13.43
13.24
1.4%
JET-DB
13.68
16.97
17.67
14.50
21.9%
Diesel-DB
14.06
16.27
15.96
14.42
10.7%
HSFO-DB
-3.48
-1.88
-5.60
-8.39
33.3%
PX CFR Taiwan-ULG95
270.19
253.45
252.03
370.52
-32.0%
MX FOB Korea-ULG95
115.77
85.69
57.30
158.90
-63.9%
BZ FOB Korea-ULG95
188.31
101.17
206.55
326.13
-36.7%
TOL FOB Korea-ULG95
103.11
46.19
77.17
170.10
-54.6%
500SN Ex-tank Singapore-HSFO
398.32
373.03
500.97
499.86
0.2%
Bitumen FOB Singapore-HSFO
36.66
24.28
87.91
-66.60
232.0%
Aromatic Spreads ($/ton)
Lube Base Spreads ($/bbl)
Source : TOP
Key Investment Table
Company
CHINA
SINOPEC CORP-H
PETROCHINA-H
TAIWAN
NAN YA PLASTICS
FORMOSA PLASTIC
FORMOSA CHEM & F
JAPAN
TOSOH CORP
JX HD
MITSUI CHEMICALS
HONG KONG
SINOPEC KANTONS
SINOPEC SHANG-H
INDIA
RELIANCE INDS
BHARAT PETROL
INDIAN OIL CORP
Malaysia
PCHEM
PETRONAS DAGANGA
THAILAND
PTT PCL
PTT GLOBAL CHEM
THAI OIL PCL
IRPC PCL
BANGCHAK PETROLE
INDORAMA VENTURE
AVERAGE
Key Risks
PBV
2015F
2016F
PER
2015F
2016F
REC./BB
Rating
Current
Price
Target Price
Upside
(%)
3.36
3.35
7.6
10.6
6.6
9.4
-13.4%
-11.4%
1.1
1.3
1.1
1.2
21.2
26.6
14.1
15.8
4.41
4.17
2.96
78.2
80.8
79.6
79.6
85.7
71.3
1.8%
6.1%
-10.4%
1.9
1.8
1.6
1.8
1.7
1.6
19.4
21.2
25.0
17.6
19.0
21.3
3.55
3.50
3.35
657.0
521.2
404.0
651.3
502.2
373.5
-0.9%
-3.6%
-7.5%
1.4
0.7
1.1
1.3
0.6
1.0
6.4
23.8
11.2
9.0
16.2
4.45
3.55
7.2
5.3
7.8
3.5
8.3%
-34.9%
1.4
2.6
1.3
2.4
18.2
28.1
13.9
25.2
4.60
4.34
4.17
875.3
732.3
349.6
1064.6
842.9
402.8
21.6%
15.1%
15.2%
1.2
2.5
1.2
1.0
2.2
1.1
11.0
16.9
14.6
9.0
12.5
9.9
2.58
1.78
6.3
22.3
5.2
17.0
-17.5%
-23.7%
2.1
4.2
1.9
4.0
19.2
31.4
17.0
28.1
BUY
BUY
HOLD
BUY
HOLD
BUY
362.00
63.25
55.25
4.64
35.50
25.25
398.00
67.50
54.00
5.20
33.50
32.00
9.9%
6.7%
-2.3%
12.1%
-5.6%
26.7%
1.4
1.1
1.1
1.2
1.4
1.6
1.5
1.3
1.0
1.0
1.1
1.3
1.5
1.4
9.7
9.6
11.1
11.5
11.1
28.2
14.4
9.1
8.6
9.3
10.3
9.7
19.2
13.3
1) There could be an unplanned shutdown of refinery,
aromatics plant, and other plants of TOP.
2) GRM, aromatics spread, and lubricating oil spread may
miss our forecast.
Remark: - Calculation excluded companies with unusual PER or PBV
BB Rating is the average from Recommendation Consensus of analysts in
the last 12 months etc.
5 = BUY, 4 + WEAK BUY, 3 = HOLD, 2 = WEAK SELL, 1 = SELL
Source : Bloomberg / ASP Research
Source : ASP Research