Comprehensive Financial Analysis of PTT and Other Key Players

UOB Kay Hian – November 20, 2024

In the ever-evolving landscape of the energy sector, understanding the dynamics of key players is crucial for making informed investment decisions. This analysis delves into the intricacies of PTT, a Thailand-based oil and gas behemoth, and explores its strategic maneuvers alongside insights into other noteworthy companies in the sector.

PTT: Strategic Shifts and Future Prospects

Overview: PTT Public Company Limited stands as a cornerstone in Thailand’s energy sector, with diverse operations spanning upstream petroleum, downstream petroleum, and coal businesses. The company remains committed to fostering growth and innovation, even as it grapples with market challenges.

Investment Recommendation: The analysts at UOB Kay Hian maintain a “BUY” rating for PTT, with a target price set at Bt37.00, reflecting a 13.85% upside potential.

Key Developments

• Five-Year Plan: PTT is on the brink of finalizing its five-year strategic plan by December 2024, focusing on carbon capture and storage (CCS) and hydrogen businesses. The electric vehicle (EV) segment, however, faces scrutiny due to stiff market competition, prompting PTT to evaluate potential strategic partnerships or even divestment.
• Single Pool Gas Initiative: Expected to conclude by early 2025, this initiative aims to reduce GSP production costs, enhancing efficiency amid fluctuating liquefied natural gas (LNG) prices.
• Clean Fuel Project (CFP): As a major shareholder of Thai Oil (TOP), PTT is steadfast in supporting the CFP despite facing subcontractor protests and financial challenges. The project is likely to experience a one-year delay, incurring additional costs but no expected capital increase or impairment charges.

Financial Outlook

PTT’s net profit for 2024 is projected at Bt94,726 million, with expectations of a flat core profit in 2025 at Bt85.0 billion. The company’s diversified portfolio, including exploration, production, and refining, is poised for recovery, supported by improved gas separation business performance. Crude oil prices are anticipated to average US\$80/bbl in 2025, influencing the overall profit margin.

Other Notable Players in the Energy Sector

Bangchak Corporation (BCP)

In the realm of oil and gas, Bangchak Corporation emerges as a preferred choice with a target price of Bt45.00. The company’s strategic focus on refining processes and sustainable energy solutions positions it favorably amidst market volatility.

Indorama Ventures (IVL)

Indorama Ventures, a global player in the petrochemical sector, commands attention with a target price of Bt32.00. The company’s robust operational framework and strategic investments in sustainable practices highlight its potential for significant growth.

Environmental, Social, Governance (ESG) Commitments

PTT’s commitment to ESG principles is evident in its comprehensive strategy encompassing business growth, social responsibility, and governance. The company targets carbon neutrality by 2040 and net-zero emissions by 2050, underscoring its dedication to sustainable development.

Through initiatives like the PTT Group Innovation for Community Project, the company fosters smart farming and community-based tourism, contributing to societal progress. PTT’s governance practices reflect a strong compliance framework, ensuring transparency and integrity across operations.

In summary, PTT and its contemporaries in the energy sector are navigating a complex landscape characterized by both opportunities and challenges. The strategic decisions and financial outlooks of these companies offer valuable insights for investors seeking to capitalize on the evolving energy market dynamics.