Q4 2012F: Running of CDU-3 may lift profit Qtr to QtrBangchak Petroleum Plc (BCP)
Profit could jump QoQ on higher crude run. We estimate 4Q112 net profit at
Bt1.5bn, +40% QoQ and 176% YoY. The main factor behind the growth QoQ is the
doubling of crude run to 85kbd from only 38.7kbd in 3Q12. However, this was offset by
a QoQ lower gross refining margin (GRM) arising out of a lower base GRM and stock
loss of US$5/bbl from high-cost inventory. On the plus side it will book insurance
compensation of Bt300mn out of the total Bt800mn for property damage, which could
lead full year 2012 net profit 5% above our projection. We maintain our Buy with TP
raised to Bt40/share from Bt32/share.
Base GRM of US$7/bbl achievable. We expect BCP's base GRM to remain favorable
in 4Q12F at US$10/bbl, though likely to fall from the abnormally high level in 3Q12 of
US$14.03/bbl, given more contribution from lower-margin CDU-3. Management
confirmed that the base GRM for 2012 was still above target of US$7/bbl.
Higher contribution from oil marketing. Marketing margin is likely to improve
strongly from only Bt0.44/litre to more than Bt0.6/litre due to higher refined oil
production from its own refinery after it had to procure products from other refineries
to sell to its customers during 3Q12, slimming margin. The return of more production
from CDU-3 led BCP to spur its marketing arm to increase sales volume to offset what
it lost in 3Q12.
More earnings from solar business. We estimate EBITDA contribution from the
solar business to rise from Bt148mn in 3Q12 to Bt180mn in 4Q12F upon a full quarter
of operations of its first phase solar farm with installed capacity of 44MW. This would
bring full-year EBITDA contribution from solar (Bt435mn) slightly above its target of
Bt400mn. Contribution could increase to ~Bt1.4bn in 2013F upon a full year of phase 1
operations and nine months of phase 2, with total installed capacity up to 94MW.
Positive guidance for 2013F. Management remains confident it will reach its target
base GRM of US$7/bbl, which we see as easily achievable from current operations. Its
crude run will also rise to 105-107kbd. Management expects EBITDA contribution from
the solar business to reach Bt1.4bn in 2013F and will also book more insurance
compensation, i.e. the remaining Bt500mn for property damage and roughly Bt600mn
for business interruption. Thus, the EBITDA of Bt9bn should be achievable.
TP is raised to Bt40 with BUY rating maintained. BCP's share price has increased
by 25% during the past three months on market optimism about its earnings
prospects and cheap valuation vs. peers. Our current TP includes only 44MW (phase 1)
of its solar business with the remaining 125MW of phase 2 and 3 likely to come on line
in 2013-14F. Hence we raise our TP from Bt32 to Bt40 to reflect full contribution from
its solar business plus the better outlook for its oil refinery business.