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Only growth lies ahead BUY


- 1Q14 profit beats projection

IRPC announced 1Q14 net profit at B344m, dropping 56.2%qoq but B100m

higher than our projection as the market GIM was US$0.20/barrel better than

expected. The substantial decline occurred because the company did not have

an extraordinary profit from the land sale and selling of its stake in IRPC Clean

Power like it did in 4Q13. Normalized profit in 1Q14 decreased only 18.9%qoq

to B312m due to the following factors. 1) A stock loss of US$0.41/barrel or

B207m was recognized, versus a stock gain of US$0.14/barrel in the previous

quarter. 2) An oil hedging gain dropped to US$1.14/barrel or B580m from

US$2.33/barrel. At the same time, the market GIM in 1Q14 increased

56.7%qoq to US$7.81/barrel, making overall accounting GIM in this quarter

drop 4.9%qoq to US$8.50/barrel. Moreover, the company also booked a Fx

gain of around B156m from the Baht appreciation. Overall, 1Q14 profit made

up 9.9% of FY2014 forecast.

- Profit uptrend foreseen in the rest of 2014

We maintain FY2014 earnings forecast. Although 1Q14 net profit made up

only 9.9% of the forecast, 2Q14-4Q14 net profit is likely to show strong

growth. 2Q14 olefins spreads are expected to widen thanks to recovering

demand and entrepreneurs' low stock, and aromatics spreads are likely to

already hit the bottom and start to stabilize from now on. For the refinery

business, GRM is projected to stay close to 1Q14 due to the U.S. driving

season. In 2H14, petrochemical spreads are expected to rebound rapidly,

especially olefins because of increasing demand in high seasons (winter and

year-end festive season). Moreover, benefit from Delta project would be fully

booked in the second half of the year, thus helping to improve the GRM by

US$1-1.5/barrel from present.

- Turnaround stock of olefins

FY2014 fair value (DCF) is B4.20. We recommend buying. IRPC is a

turnaround stock with EPS projected to surge aggressively and P/E ratio

projected to drop significantly after completing Phoenix project, from 20.7x in

2014 to 13.3x in 2015.

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