Overview of PTT Global Chemical PCL

PTT Global Chemical (PTTGC) is a fully integrated petrochemical and chemical company with a primary focus on olefins-derived products like ethylene and propylene. The company operates within the Materials sector and has been significantly impacted by ongoing market challenges, including weak demand and declining petrochemical spreads.

Stock Performance and Major Shareholders

PTTGC’s share price is currently at Bt21.50, with a target price set at Bt23.00, reflecting a potential upside of 7.0%. However, this target price was revised downward from Bt24.50 due to disappointing financial performance. The company has a market capitalization of Bt113,848.4 million (US\$3,324.9 million), with PTT being its largest shareholder at 48.9%, followed by NDVR at 6.1%.

4Q24 Performance: A Net Loss Expected

PTTGC is projected to report a net loss of Bt11 billion for 4Q24. This is attributed to Bt4.5 billion in provisions for subsidiaries PTTAC and Vencorex, declining spreads in the petrochemical industry, and an unplanned 45-day refinery shutdown. The company’s revenue for 4Q24 is expected to be Bt140,008 million, marking a 15% year-on-year decline and a 7% quarter-on-quarter drop. EBITDA is forecasted at just Bt2,242 million, a significant 76% YoY and 68% QoQ decline.

Olefins Business: Weak Demand and Rising Costs

The Olefins segment saw declining spreads for high-density polyethylene (HDPE) and low-density polyethylene (LDPE), which fell by 2.2% and 4.7%, respectively. This was due to increased capacity additions and weak market demand. Additionally, a retroactive ethane cost of Bt200 million further eroded the segment’s profitability. However, ethane usage in production increased to 35% in 4Q24, up from 31% in 3Q24.

Aromatics Business: Declining Spreads

The aromatics segment also faced challenges, with the BTX spread declining to US\$191/tonne, down 21% quarter-on-quarter. PX and BZ spreads also dropped by 23% and 16% QoQ, respectively, highlighting the segment’s vulnerability to market fluctuations.

Refinery Operations: Impact of Unplanned Shutdown

PTTGC’s refinery operations were disrupted by a 45-day unplanned shutdown of the oil quality enhancement unit. This reduced the refining rate to 95% in 4Q24 from 104% in 3Q24. The shutdown led to increased reliance on hydro-skimming refining and a higher proportion of fuel oil production. Despite these challenges, the gross refining margin (GRM) remained flat at US\$3.5/bbl.

Financial Outlook

PTTGC’s financial metrics paint a challenging picture:

• Revenue: Bt615,266 million forecasted for FY2024, down 1% YoY.
• Net Profit: A net loss of Bt29,072 million is expected for FY2024.
• EBITDA: Forecasted at Bt36,332 million for FY2024, a 10.2% YoY decline.
• Net Debt-to-Equity Ratio: Projected to rise to 72.6% in FY2024.

Earnings Revision and Stock Recommendation

UOB Kay Hian has revised its 2025 earnings estimates for PTTGC, reducing the net profit forecast by 46% to Bt5.5 billion. This adjustment reflects weaker petrochemical spreads and a challenging operating environment. Despite trading below book value, the recommendation remains HOLD with a revised target price of Bt23.00. Investors are advised to consider switching to alternative stocks in the oil and gas sector, such as Bangchak Corporation (BCP) and Indorama Ventures (IVL).

Environmental, Social, and Governance (ESG) Initiatives

PTTGC has a strong ESG profile, with a CG Report rating of 5 and an AAA SET ESG rating. Key initiatives include:

• Environmental: Focus on resource efficiency and decarbonization to achieve net-zero greenhouse gas emissions by 2050.
• Social: Promoting social enterprises, reducing inequality, and improving community welfare.
• Governance: Emphasis on transparency and innovation in environmentally friendly chemicals.

Key Statistics and Assumptions

Additional key metrics and assumptions include:

• HDPE price forecast for 2025 reduced by 14% to US\$950/tonne.
• HDPE spread forecast lowered by 20% to US\$320/tonne.
• Net profit margin for FY2024 is projected at -4.7%, with a recovery to 1.6% in FY2025.

Conclusion

PTT Global Chemical faces a challenging road ahead, marked by weak market demand, declining spreads, and operational disruptions. While the company’s ESG initiatives and long-term strategies are commendable, near-term financial performance remains under pressure. With a HOLD recommendation, investors are encouraged to explore opportunities in alternative stocks within the oil and gas sector.