TOP - Core operations show big improvement (TP Bt105.00, OUTPERFORM)
(18/10/2018 - 08:20)
กลุ่มอุตสาหกรรม พลังงานและสาธารณูปโภค
หุ้น TOP
มูลค่าพื้นฐาน 105.00
คำแนะนำ BUY
  • Expect 3Q18F earnings to come in at Bt4.6bn, down 3% qoq and 39% yoy, mainly due to lower stock gain
  • Market GRM and PX spreads to remain healthy in 4Q18
  • OUTPERFORM, Bt105/sh TP is pegged to 1.5x FY19F P/BV; ready to capture the GRM upcycle

 

3Q18F earnings led by higher market GRM, but lower qoq stock gain

Market GRM should increase by US$1.0 qoq to US$5.0 led by smaller crude premium and absence of shutdown, which added US$0.7 and US$0.3 to market GRM respectively. Refinery run rate should return to normal 110% from 108% in 2Q18 (one-month shutdown of CDU1 (50kbd) in June). We expect TOP to book Bt1.1bn stock gain due to higher crude oil prices (+US$3.6 qoq) vs Bt4.3bn stock gain in the previous quarter. Aromatics should perform better qoq driven by improving PX spreads (+US$137 qoq to US$405/ton) on strong downstream polyester demand. This should also lead to higher utilization at 90% from 84% in 2Q18. Lube base oil should soften US$0.2 qoq to US$0.5/bbl due to weaker bitumen demand. There should not be any major hedging gain/loss. We expect TOP to report 3Q18F earnings of Bt4.6bn, down 3% qoq and 39% yoy.

 

Market GRM and PX spreads to remain healthy in 4Q18

We are optimistic on near and medium-term GRM outlook. The near-term outlook is imrpoving driven by lower supply from maintenance shutdown during October, at 5m bpd globally, and strong demand in winter as reflected in higher jet fuel and diesel spreads. This may drive up crude premium but we doubt that it would rise as high as US$3.7/bbl for Murban crude in 2Q18. Meanwhile, global inventory of middle distillates is still below 5-year average. We also expect healthy PX spread to support earnings and should peak in 2020.

 

OUTPERFORM, TP Bt105/sh; ready to capture the GRM upcycle

TOP will be the most beneficiary of the implementation of IMO 2020 given its highest leverage on middle distillates (diesel, jet). The stock is poised for the re-rating. We maintain Outperform and TP Bt105/sh, based on 1.5x FY19F PBV (ROE 16%), impying 9.6x PE and 4.7% dividend yield.