The Bangchak Petroleum

Raise forecast; up 2013's fair value to B50/share BUY

The Bangchak Petroleum Plc (BCP)

4Q12's profit grows 7%qoq as expected, thanks to extraordinary items

BCP posted 4Q12's net profit at B1.14bn, increasing 7%qoq as projected due

mainly to the following extraordinary items: 1) insurance compensation

(property damage) of B310m and 2) a reversal of asset impairment for a 20-

rai land in Srinakarin because the land value has increased. However, norm

profit decreased by 19.1%qoq to B836m because 1) in 4Q12 there is not a

large stock gain like in was in 3Q12 (at of US$6/bbl) but a stock loss of

US$2/bbl and 2) base GRM in 4Q12 decreased to US$10/bbl from US$14/bbl

in 3Q12. Nevertheless, overall profit was still sustained by rising production

capacity after the main refinery unit of BCP (with capacity of 80,000 bbl/day)

that had been damaged from the fire accident could resume its commercial

run by the end of October 2012, adding total utilization rate in 4Q12 to 85,000

bbls/day from 39,000 bbls/day in the prior quarter. Overall, total net profit in

2012 was B4.27bn, decreasing 23.8%yoy.

Raise 2013-2014's forecast to reflect positive outlook toward GRM

We revise up 2013-2014's net profit forecast by raising an assumption for

GRM of BCP in 2013-2014 from US$4.5/bbl to US$7/bbl, which is higher than

peers'. As a small power plant, BCP has fully benefited from using of high

quality oil such as local crude and Far East crude at almost 90% which makes

GRM higher than from using of Middle East crude. Moreover, BCP also does

not have an add-on business in petrochemical line, so it can optimize its

refining better than those with petrochemical business which have to produce

sufficient products for using in petrochemical plants. Moreover, GRM tends to

remain strong in 2014; an additional supply from new refineries will be offset

by a permanent shutdown of some refineries, so net additional supply will

stand at only 200,000-300,000 bbls a day compared with the demand growth

which is anticipated at 1 million a day. We estimate 2013's net profit to grow

23.8percent from the previous forecast, to the growth of 27.7%yoy from finished

oil sales that are projected to increase from a resumption of all refinery units

with total capacity of around 110,000 bbls/day for a full year after the annual

maintenance shutdown and the fire accident at the main refinery unit with

capacity of 80,000 bbls/day last year had made total utilization rate in 2012

decrease to only 74,000 bbls/day. At the same time, GRM is anticipated to

stabilize at US$7/bbl. Moreover, the company will begin to recognize

additional income from a solar power plant phase 1 with capacity of 40 MW for

a full year and phase 2 with capacity of 50 MW after it completes the

construction in 1Q13.



BUY. Profit in next 1-2 years to grow with more stability

Under the new forecast, 2013's fair value, DCF, is B50.00/share. We reiterate

to buy. Continuous profit growth is foreseen in the next 1-2 years after

recognition of income from the solar power plant which is quite certain

according to the power purchase contract. Moreover, PER in 2013 at 10x is

still lower than the regional average of 13-14x.