Analyst Expects PTT’s Profit of ฿77Bn in 2021 as Refineries Recover, Giving “BUY” at ฿48

Analyst Expects PTT’s Profit of ฿77Bn in 2021 as Refineries Recover, Giving “BUY” at ฿48

PTT sees a robust rebound in 2021, analyst expects a profit of 77 billion baht to be reported,  growing 93% from the 2020 net profit projection of 40.3 billion baht, driven by the contribution of PTTGC, TOP and IRPC due to higher stock gain and the increase in value from the listing of OR. The analyst gave a “BUY” recommendation on PTT with a target price at ฿48.00/share.


KGI Securities (Thailand) forecasts PTT Public Company Limited (PTT) to report 2021F earnings of 77.7 billion baht, up 93% YoY thanks to materially higher stock gains for its three listed refinery subsidiaries – PTT Global Chemical Public Company Limited (PTTGC), Thai Oil Public Company Limited (TOP), and IRPC Public Company Limited (IRPC) after KGI estimated Dubai price to recover YoY from US$42/bbl to US$53/bbl in 2021.


Earnings from PTT only should grow YoY in 2021 due to i) NG sales volume increasing, ii) GSP margin improving from better polyethylene (PE) prices and softer gas price, and iii) oil sales volume rising. KGI upgraded its PTT’s 2021 target price to ฿48.00 from ฿42.00, based on SoTP methodology to reflect four listed petroleum and petrochemical subsidiaries’ target price upgrades and adding the valuation of the listing of PTT Oil and Retail Business Company Limited (OR). 


KGI maintains a rating of Outperform thanks to high earnings growth next year, but removing PTT from its top picks as the share price has increased 19% since September 8, which was when the analyst added the counter to its top picks.


KGI revises down PTT’s earnings estimate for 2020 by 14% to 40.3 billion baht mainly due to higher stock losses from three listed refinery and petrochemical subsidiaries PTTGC, TOP and IRPC after it reduced its Dubai crude price assumption from US$45/bbl to US$42/bbl this year, while maintaining the price at US$53/bbl next year. 


Base GRMs of the three subsidiaries in 2020 are also adjusted down from the previous projection from the impact of COVID19. However, KGI adjusted up its assumption for gas pool price by 3% to US$6.5/mmbtu and US$5.2/mmbtu in 2020-21, following an upward revision to PTT Exploration and Production Public Company Limited (PTTEP)’s gas selling price. 


The analyst also revised up our oil marketing margin by 10% to Bt1.10/liter in 2020 and 5% to Bt1.05/liter in 2021 as the government will not put much pressure on the margin for Thailand’s retail oil business if diesel retail selling price is below Bt30/liter (implied Dubai price of about US$60/bbl). Meanwhile, KGI cut its 2021F earnings forecast by 1% to Bt77.7bn due to lower shareholding on OR from 100% to 75% after its IPO.