PTT Public Company Limited (PTT TB)
PTT, a Thailand-based oil & gas company, reported a qoq and yoy decrease in net profit for 3Q24. This was largely due to declines in the performance of its subsidiaries and affiliates. Despite lower sales, EBITDA for the gas business rose qoq, helped by reduced production costs. Looking ahead to 4Q24, core profit is expected to rise qoq, driven by recovering profits in the E&P and refinery businesses, which should sufficiently offset the seasonal decline in gas sales.
3Q24 Results
PTT reported a 3Q24 net profit of Bt16.3b, down 54% qoq and 48% yoy. This decline was primarily due to lower margins across all business segments due to losses from subsidiaries and affiliates, along with an extraordinary loss of Bt2.7b. Key contributing factors included:
- A stock loss of Bt22.5b
- Extraordinary losses from subsidiaries and affiliates totaling Bt9.4b
- A derivative and forex gain of Bt29.5b
Gas Business
Gas business EBITDA rose by 8% qoq, primarily driven by a rebound in the gas separation business (GSP) due to reduced sales costs. This improvement offset several challenges:
- A decline in both ASP and gas sales volume in the GSP
- An 11% qoq decrease in gas sales volume for the supply and marketing (S&M) business
- Reduced revenue from the Transmission Pipeline business (TM)
- Increased losses in the Natural Gas for Vehicles (NGV) business
Key Financials
PTT’s financial performance in 2024 is expected to show a net turnover of Bt3,220,515m, with EBITDA at Bt403,867m and net profit at Bt94,726m. The company’s PE ratio stands at 11.0x, with a dividend yield of 4.6%.
Subsidiaries and Affiliates Performance
Subsidiaries and affiliates recorded a net loss of Bt11.4b in 3Q24, compared to a net profit of Bt34.6b in 2Q24 and Bt39.8b in 3Q23. This was due to several factors:
- PTT Exploration and Production’s (PTTEP) 3Q24 net profit dropped qoq and yoy to Bt17.9b due to reduced sales volume and higher unit costs.
- The refinery business turned to a net loss as gross refinery margin (GRM) declined, and a large stock loss was recorded following a drop in crude oil prices.
- PTT Oil and Retail (OR) posted a net loss of Bt1.6b, with lower marketing margins impacted by a large stock loss and additional expenses from business terminations.
- Global Power Synergy (GPSC) saw net profit decline qoq and yoy, driven by higher production costs and a significant forex loss.
Stock Impact
4Q24 core profit is expected to recover, supported by a rebound in core profit from the exploration and production (E&P) business and an improvement in core profit from the refinery business. These gains are expected to sufficiently offset the anticipated decline in PTT’s gas business profit due to seasonal sales reductions.
Valuation/Recommendation
PTT maintains a BUY recommendation with an SOTP-based target price of Bt38.00. In the oil & gas sector, Bangchak Corporation (BCP TB) and Indorama Ventures (IVL TB) are preferred with target prices of Bt45.00 and Bt32.00, respectively.
Environmental, Social, Governance (ESG)
Environmental
PTT focuses on refining its energy investment portfolio with an emphasis on low carbon businesses, enhancing the profitability of the future energy & beyond segment to at least 30%, and targeting carbon neutrality by 2040 with an aim of attaining net zero emissions by 2050.
Social
PTT Group Innovation for Community Project includes smart farming, smart marketing, and community knowledge management. The Human Capital Index (HCI) has achieved its target of 80%.
Governance
No cases of non-compliance with significant legal implications in operations. The National Anti-Corruption Commission’s Integrity and Transparency Assessment (ITA) are at a PASSED, Good level.
Key Statistics
Dubai crude oil prices saw a decline, with 3Q24 averaging US\$78.31/bbl, down 10% yoy and 8% qoq. Gas pool prices showed a 6% qoq increase to US\$8.28/mmbtu.
GAS Sales Volume by Customer
In 3Q24, gas sales volume by customer distribution was as follows:
- Electricity Generating Authority of Thailand (EGAT): 14.6%
- Independent Power Producers (IPP): 16.1%
- Small Power Producers (SPP): 28.4%
- Gas Separation Plants (GSP): 19.0%
- Industry: 19.4%
- Natural Gas Vehicles (NGV): 2.6%
GSP’s Performance
GSP’s total sales volume and utilization rate saw a slight decline in 3Q24, with sales volume at 1,750 Kton and utilization at 84%.
Loss from Natural Gas for Vehicles (NGV) Business
The NGV business recorded a loss of Bt492m in 3Q24, continuing a trend of losses from previous quarters.
Conclusion
PTT’s performance in 3Q24 was marked by significant challenges, particularly from its subsidiaries and affiliates. However, the company remains optimistic about a recovery in 4Q24, driven by improvements in the E&P and refinery businesses. With a strong focus on ESG initiatives and a comprehensive strategy for future growth, PTT continues to be a significant player in the energy sector.
