PTT’s 3Q24 net profit (release Nov 13) is expected to fall a sharp 47% YoY and 53% QoQ) to Bt16.7bn due to loss contribution by the P&R* segment as it suffered from huge stock losses and poor product spread. Weaker profit at E&P and gas businesses will also be a drag on profit, though will still be the key support to 3Q24 profit. Looking ahead, we expect profit to recover strongly in 4Q24 on higher profit at E&P and gas businesses, plus an earnings turnaround at P&R and oil marketing segments. Weak earnings in 3Q24 are largely priced in, in our view, as the share has underperformed the SET by 7% over the past three months. Current share price is undemanding at 0.8x PBV (2025F) and 8.1x P/E vs. 10-average of 1.3x and 14.6x. Dividend yield of 6.3% is compelling. Outperform rating is maintained with sum-of-the-parts TP of Bt41.
PTT – Preview 3Q24F: Sharp fall QoQ and YoY
Poor performance at P&R and oil marketing to drag 3Q24F profit. The fall in oil prices in 3Q24 caused huge inventory losses at P&R associates. Coupled with poor market GRM and petrochemical product spreads, we expect EBITDA contribution from this segment to turn into a loss in 3Q24F vs. Bt19.5bn in 2Q24. Earnings at the oil marketing business were also discouraging despite a slight 1% QoQ increase in sales volume. Oil segment earnings were hit by weaker gross profit/liter at only Bt0.54/liter compared to the usual Bt0.7-1.2/liter on the damage done by inventory losses and extra expenses related to the termination of a franchise in the F&B segment.
Profit of E&P and gas business to weaken QoQ. Gas sales volume is expected to decline 7% YoY and 11% QoQ to 4,285mmcfd on a drop of 12% YoY and 17% QoQ in power sector demand reflecting seasonal impact and higher power generation at hydropower plants. GSP sales volume slid 3% YoY and 2% QoQ to 1.75mt on lower gas supply from the Gulf of Thailand due to maintenance shutdowns of several gas fields, which also pushed E&P profit down 18% YoY and 25% YoY via lower sales volume. We believe gas and E&P businesses will contribute the most to core profit in 3Q24F, offsetting losses from P&R and oil marketing businesses.
4Q24F operating profit to recover QoQ on better profit from E&P. We expect E&P profit to remain the key earnings support in 4Q24 after the planned maintenance of gas fields in the Gulf of Thailand. This will also support GSP operations. We expect a higher market GRM for the P&R segment in 4Q24F, driven by crack spread for middle distillate products, and lower stock losses.
Key risks: An economic slowdown would erode demand for PTT’s energy and petrochemical products while oil price volatility may cause more stock loss. Other risks are asset impairment, losses from asset divestment, regulatory changes on GHG emissions and the government’s intervention in the retail oil business. Key ESG risk factors are the environmental impact of its business and how it adapts during the transition to clean energy.