Comprehensive Analysis of Bangchak Corporation PCL – Q3 2024 Financial Review

Date: Friday, 08 November 2024

Broker: UOB Kay Hian Private Limited

Introduction to Bangchak Corporation PCL

Bangchak Corporation PCL (BCP) has made significant strides in the energy sector, especially after securing 76.34% ownership of ESSO in October 2023. This acquisition has positioned BCP as Thailand’s largest refinery with a substantial capacity of 294kbd. BCP’s operations encompass the distribution of refined oil products through petrol stations under its robust retail marketing segment. Moreover, BCP is venturing into alternative energy with investments in solar, wind, and biofuel projects.

Stock Information and Performance

Share Price: Bt33.00

Target Price: Bt45.00

Upside: +34.3%

Market Cap: Bt48,303.8m (US\$1,354.6m)

Bloomberg ticker: BCP TB

GICS sector: Energy

52-week high/low: Bt46.75/Bt31.50

Major Shareholders: Thai NVDR 18.7%, Social Security Office 14.2%

3Q24 Financial Performance

BCP reported a net loss of Bt2.1b for Q3 2024, a significant downturn from the Bt11.1b gain in Q3 2023 and Bt1.8b gain in Q2 2024. This loss was primarily attributed to an inventory loss of Bt5.1b. However, excluding extra items, the core profit stood at Bt711m, down 81% year-on-year (yoy) but up 2,122% quarter-on-quarter (qoq). Despite the net loss, the results were in line with expectations, presenting a buying opportunity given the 22% year-to-date decline in share price. BCP’s current trading at 4.6x 2025F PE has the potential to offer a 5.6% dividend yield for 2025.

Detailed Financial Highlights

Turnover: Bt154,193m, up 63% yoy

Core EBITDA: Bt8,621m, down 33% yoy

Inventory Gain/(Loss): Bt(5,120)m

Tax: Bt(7,535)m

Net Profit: Bt(2,093)m

EPS: Bt(1.52)

Core Profit: Bt711m

Operational Insights

Refinery and Retail Performance

BCP’s refinery segment faced challenges with a weak gross refinery margin (GRM) dropping to US\$2.5/bbl from US\$14.7/bbl in Q3 2023. Despite this, the resumption of operations at the Phra Khanong refinery boosted core profit by 2,122% qoq. The refinery’s run rate increased to 88%, up from 78% in Q2 2024 and 56% in Q3 2023. The exploration and production (E&P) business also surged, with a 38% yoy and 19% qoq increase in EBITDA due to higher production volumes and gas prices.

Renewable Energy and Biofuel

The renewable segment, including biofuel, also showed positive trends. BCP’s renewable energy investments, focusing on solar, wind, and biofuel, added a substantial portion to the core EBITDA, with the renewable segment contributing Bt1,319m and biofuel Bt231m for Q3 2024.

Future Growth Prospects

Positive Outlook for 4Q24-2025

The outlook for BCP in 4Q24 and beyond is optimistic. The Singapore benchmark GRM has risen to US\$4.2/bbl, indicating potential for better margins. Additionally, strong contributions are expected from the marketing business during Thailand’s peak driving season and a positive outlook for the renewable energy segment, supported by favorable water flow for hydro power plants in Laos. BCP also anticipates reduced interest expenses following BSRC’s refinancing activities in July 2024.

Sustainable Aviation Fuel (SAF) Project

A key driver for BCP’s long-term growth is its Sustainable Aviation Fuel (SAF) project. BCP is constructing a 7kbd SAF facility with an investment of approximately Bt8.0b. This project leverages feedstock from Thanachok Vegetable Oil, Thailand’s largest used cooking oil collector, in which BCP has a 45% stake. The SAF facility is expected to commence operations in Q1 2025, contributing earnings of around Bt3.5b in 2025 and potentially increasing to Bt4.6b in 2026.

Investment Recommendation

Given the 22% ytd decline in share price, we believe this presents a strategic buying opportunity. BCP is poised for significant earnings improvement in 4Q24-2025, driven by higher utilization rates, a better GRM outlook, and contributions from the SAF project. Investors can also expect impressive dividends for 2H24. We maintain a BUY recommendation with a target price of Bt45.00, which implies 0.7x 2025F P/B. BCP is currently trading at 4.6x 2025F PE, making it an attractive long-term investment.

Environmental, Social, and Governance (ESG) Initiatives

Environmental Goals

BCP aims to achieve carbon neutrality by 2030 and net zero emissions by 2050. The company plans to enhance production efficiency and utilize products that reduce emissions by 20% by 2024 and 30% by 2030.

Social Commitment

Social development is integral to BCP’s business management. The company fosters a corporate culture that emphasizes social responsibility and sustainability.

Governance Standards

BCP consistently maintains an “Excellent” Corporate Governance (CG) score from the Thai Institute of Directors Association (IOD), demonstrating its commitment to high governance standards.

Operating Statistics

Key Financials

Profit & Loss

Balance Sheet

Cash Flow

Key Metrics