Opinion divided on IRPC's recovery

Last week Kasikorn Securities and KGI Securities rated it "neutral", Asia Plus Securities and Finansa "hold", Kiatnakin Securities "buy", Kimeng "fully valued" and Bualuang Securities "sell".

IRPC announced a net profit of Bt5.1 billion in the second quarter, up 3.4 per cent on year and 214.8 per cent on quarter, beating the market's expectation of Bt3.9 billion, according to KGI.

Sales revenue last quarter surged 33.4 per cent from the same period last year to Bt7.3 billion thanks to higher prices for refined petroleum and petrochemical products.

However, cost of sales also increased 33.4 per cent on year to Bt66.9 billion due to higher crude oil and feedstock costs. As a result gross profit margin remained unchanged at 9.2 per cent.

"Even though we are heading into a downturn for the petrochemical and refining industry, we believe the downside for the share price is limited as PTT wants to acquire a larger stake by buying shares in the market," said Sutthichai Kumworachai, an analyst with KGI.

KGI revised the gross refining margin assumption from US$4.6 per barrel to US$5.1 per barrel and increased its forecast for company earnings 18.2 per cent to Bt9.1 billion this year.

"Although the earnings in the first six months still accounted for 74.1 per cent of our revised earnings forecast, we believe this is reasonable due to potential weaker earnings in the second half," he said.

Kiatnakin revised down the appropriate buying price from Bt6.18 to Bt4.68 per share in view of a hike in the risk-free rate from 4 per cent to 5.5 per cent in line with the interest-rate movement in the financial market.

Despite its "buy" rating, Kiatnakin argued that the company's performance would result in slowdown because of a drop in fuel consumption globally and new capacity in China and India. It gave an "underweight" rating for all companies in the refining industry.

Although gross profit rose 239 per cent last quarter, Asia Plus Securities rated it "hold" due to high losses form the foreign exchange rate.