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The Bangchak Petroleum

GRM to boost 1Q14 profit along with sector BUY

The Bangchak Petroleum Plc (BCP)

- 4Q13 profit drop, but better than expected

BCP’s 4Q13 net profit was B688m, plunging 49.4%qoq (better than

expected). GRM increased by 2.1%qoq to US$4.82/barrel, which we

underestimated. However, 4Q13 net profit dropped because of the

following factors: 1) Stock gain fell by 33.7%qoq to US$2.1/barrel, totaling

B622m. 2) Marketing margin from retail business dropped by 7.5%qoq to

B0.49/litre due to fierce competition, as refineries wanted to sell as much

domestic finished oil as possibly. 3) As THB depreciated by 4.7%qoq at

end-4Q13, BCP faced B418m loss from forward exchange rate contract.

However, BCP benefited from hedging at US$1.19/barrel, totaling B353m.

Overall, FY2013 net profit increased by 8.9%yoy to B4.65bn.

- Solar plant to boost profit in 2014

We project 1Q14 profit to grow significantly from 4Q13. GRM is projected

to rise on seasonal effect, reflecting from Singapore GRM since the

beginning of 2014 until present that increases by 54%qoq to the average

of US$6.6/barrel. Moreover, many refineries worldwide would have an

annual shutdown in late 1Q14 after running at their full capacity during

winter, so some supplies would disappear. BCP's FY2014 net profit is

projected to grow by 9.8%yoy. Despite a 46-day planned shutdown of a

refinery in May-June 2014, income from solar power plant (Phase I and II

for a full year, and Phase III since 2H14) would be booked.

- "BUY". 2H13 dividend yield at 2.8%

We project end-2014 fair value (DCF) at B36/share. We reiterate "BUY".

BCP's profit is likely to grow nicely and stably in the next couple years, as

income from solar power plant with steady profit would grow as there have

been more power deals. BCP's 2H13 dividend is B0.75 (2.8%). XD date is

3 March 2014.

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