SPRC - 3Q24: Net loss worse than expected

SPRC reported a net loss of Bt2.2bn in 3Q24 vs. net profit of Bt346mn in 2Q24, worse than consensus estimate of -Bt1.7bn and INVX’s -Bt2.03bn. Behind this was a huge stock loss of US$4.47/bbl and a net loss from inventory write-down to net realizable value of US$1.32/bbl despite QoQ higher market GRM. 9M24 net profit was Bt2.1bn, falling 38% YoY and accounting for 43% of our 2024F.

Considering the recent recovery of market GRM and absence of huge inventory loss, we believe our profit target remains achievable. Nonetheless, we cut TP from Bt8.5 to Bt7.9, based on 0.8x PBV (2025F), equivalent to -1.5SD of 5-year average and implying 4.5x EV/EBITDA. We maintain our Neutral rating as weak gasoline crack spread will continue to reduce appetite for the stock, in our view.

Crude intake stable QoQ amidst weak market GRM. Crude run was stable QoQ at 157.4kbd in 3Q24 but grew 13% YoY under the optimization program to maintain operating cost/unit in a low GRM environment. Note the weak GRM, especially for gasoline in 3Q24, led it to alter its planned higher crude run in 3Q24 after increasing efficiency of the residue fluid catalytic cracking unit (RFCCU) during the maintenance shutdown in 2Q24. SPRC also reported a 2% QoQ drop in marketing sales volume, mostly bulk sales, though this increased 36% YoY due to a larger retail petrol station network.

Market GRM up QoQ as SPM back on line. Market GRM rose 80% QoQ to US$4.24/bbl upon the resumption of its crude oil offloading facilities, the off-coast single point mooring (SPM), which lifted market GRM by US$1-1.5/bbl. However, market GRM fell 49% YoY on lower gasoline crack spread. This plus the US$5.79/bbl stock loss, including the write-down of inventory, pulled GRM down to -US$1.55/bbl vs. +US$3.77/bbl in 2Q24 and +US$16.35/bbl in 3Q23.

4Q24 earnings to recover QoQ on rising market GRM. We expect a stronger GRM and more stable oil price to drive profit in 4Q24, coupled with the resumption of SPM for crude oil offloading that will reduce logistics cost and improve margin. Note that Singapore GRM is already up 20% QoQ to US$4.3/bbl in 4Q24TD.

TP cut to Bt7.90 based on PBV of 0.8x (2025F), slightly below 5-year average, implying 4.5x EV/EBITDA (2025). Although the current share price implies only 0.6x PBV (2025F) or -2.3SD of 5-year average, we believe the weak gasoline crack spread will reduce investor appetite for the stock as light products (gasoline and naphtha) account for >30% of SPRC’s yield vs. the industry average of 23%.

Key risks: Economic slowdown may hurt demand for its refined oil products which could also damage market GRM, while oil price volatility may bring more stock loss. Other risks include regulatory changes in GHG emissions and domestic oil price structure. Key ESG risk factors include the environmental impact of its business and how it adapts during the transition to clean energy.