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Bangchak Petroleum

1Q14: Beat thanks to strong marketing business BUY

Bangchak Petroleum Plc (BCP)

1Q14 net profit Bt1.56bn (EPS=Bt1.13) exceeded SCBS and market estimates, rising

126.3% QoQ, as lower competition in the domestic market boosted profit from the

marketing business. Another factor was higher refinery GRM. 1Q14 accounted for 33%

of our full-year forecast but we expect 2Q14 to be lowered by a planned maintenance

shutdown. We maintain our 2014F with upside from insurance compensation.

Valuation looks undemanding at only 8.5x 2014F PE. We maintain BUY, with TP of Bt44.

Highlights:

Sales revenue rose 3.3% QoQ and 5% YoY on more power solar contribution (+5.8%

QoQ and +99.1% YoY) that offset the lower crude run at its refinery to 97.82kbd in

1Q14 (82% utilization) from 101.17kbd in 4Q13 and 99.95kbd in 1Q13.

Base GRM widened to US$6.41/bbl in 1Q14 from US$4.82/bbl in 4Q13 on higher

gasoline crack spread but was still below 1Q13's US$8.1/bbl. With net gain from oil

hedging and inventory gain of US$0.47/bbl, accounting GRM was US$6.88/bbl,

down from US$8.1/bbl in 4Q13 and US$10.25/bbl in 1Q14.

Operating profit from the marketing business surged 402% QoQ and 39% YoY as

competition in the domestic market eased from 4Q13 from better regional market

conditions and lower ethanol cost. This lifted marketing margin to Bt0.67/liter in

1Q14 from Bt0.49/liter in 4Q13 and 1Q13.

Solar profit contribution increased 7% QoQ and 102.3% YoY. The jump YoY is due to

a full quarter of the second phase of its solar farm in Ayudhya after its late-1Q13

startup and the QoQ increase from the startup of the first unit of phase 3 in the

latter half of March 2014. At the end of 1Q14, 78MW capacity was operating.

EBITDA contribution from solar rose to 17% in 1Q14 from 15% in 2013.

Outlook for 2Q14F. The maintenance shutdown will cut crude run to 55kbd in 2Q14

with a higher GRM QoQ thanks to supply loss from regional refinery maintenance

shutdowns and greater proportion of local feedstock.


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