GGC again finished the quarter in the red, with a 3Q24 net loss of Bt183mn upon continued losses at an associate in the ethanol business and a huge Bt119mn FX loss that overwhelmed the stock gain (Bt21mn) and the reversal of provisions for litigation (Bt43mn). Core earnings turned up from a net loss of Bt3mn to profit of Bt52mn on higher EBITDA margin for both methyl ester and fatty alcohol. The net loss of Bt415mn in 9M24 was much weaker than we expected, leading us to slash our 2024F to a net loss of Bt454mn (from net loss of Bt257mn). We expect earnings to remain in the red in 4Q24 on more losses from the ethanol business, though improve QoQ on a lower negative FX impact. We maintain Underperform and our TP of Bt5.20, based on 0.6x PBV (2025F) or -2SD of 5-year average.
GGC – 3Q24: Another weak quarter
Methyl ester (biodiesel): competition still hurting sales volume. Contribution from ME increased sharply in 3Q24 with adjusted EBITDA surging to Bt61mn from Bt7mn in 2Q24. Adjusted EBITDA margin rose to 2.2% from 0.2% in 2Q24. Stiff competition, in addition to seasonal impact, pulled sales volume to an 8-year low of 67kt (-3.2% YoY, -10.4% QoQ) which kept utilization rate at only 54% in 3Q24, vs. 55-63% over the past 12 months.
Fatty alcohol: EBITDA margin crawling up QoQ. FA segment EBITDA contribution rose 19% QoQ to Bt192mn on a 2.6ppt rise in adjusted EBITDA margin to 10.5% and a 5% QoQ increase in sales volume from market restocking ahead of festive season in 4Q24/1Q25, still facing persistent container shortage and high freight cost, plus the enforcement of the EU Deforestation Regulation (EUDR) which will reduce feedstock supply. The EU commission announced a postponement of the effective date of EUDR to Dec 30, 2025 from Dec 30, 2024. FA plant utilization rate was maintained at 105% in 3Q24, slipping from 106% in 2Q24 due to a brief shutdown to replace the catalyst. Profit was also boosted by inventory gain of Bt15mn.
2024F earnings slashed further. GGC’s net loss of Bt415mn in 9M24 disappoints and led us to cut earnings again, this time to a loss of Bt454mn from a loss of Bt257mn to reflect the loss contributed by an associate in the ethanol business and FX loss in 9M24. We believe high competition in biodiesel market and more costly feedstock will continue to drag on earnings, though there will be a partial offset from a higher margin for the fatty alcohol business, which is entering high season in 4Q24/1Q25.
TP of Bt5.2/share maintained, based on 0.6x PBV (2025F). Although earnings continue to deteriorate, this should be largely priced in, given the weak share price over the past three months. We maintain our TP at Bt5.2/share, based on 0.6x PBV (2025F) or -2SD of 5-year average. The TP implies 4.3x EV/EBITDA (2025F) vs. 5-year average of 10.6x.
Risk factors: Volatile CPO and CPKO prices may cause stock loss and lower product spread. The government’s wobbly policy on the biodiesel mandate for domestic high-speed diesel also hurts demand for ME in the medium term.