Overview of PTT Global Chemical’s Business

PTT Global Chemical (PTTGC) is a fully integrated petrochemical and chemical company. Its main products, derived from olefins such as ethylene and propylene, serve as the foundation for its diverse portfolio. Despite its comprehensive vertical integration, challenges in the global petrochemical market have significantly impacted the company’s performance.

Key Financial Metrics and Stock Performance

PTTGC reported a share price of Bt19.60 with a target price of Bt21.00, reflecting a 7.1% upside potential. However, this target price has been revised downward from the previous Bt23.00. The company’s market capitalization stands at Bt113,848.4 million (approximately US\$3,324.9 million), and its 52-week high and low prices were Bt41.00 and Bt23.40, respectively. Major shareholders include PTT with a 48.9% stake and NDVR holding 6.1%.

Performance Highlights: 4Q24 Results

PTTGC reported a net loss of Bt11.7 billion in 4Q24, aligning with expectations but still reflecting significant challenges. Key contributors to the loss included provision expenses of Bt4.3 billion from subsidiaries PTT Asahi (PTTAC) and Vencorex. Additionally, weaker petrochemical spreads and an unplanned refinery shutdown exacerbated the situation.

Revenue for the quarter dropped to Bt133.3 billion, a 19% year-on-year (YoY) and 12% quarter-on-quarter (QoQ) decline. EBITDA plunged by 77% YoY and 68% QoQ to Bt2.7 billion. Specific segments faced notable setbacks:

• Refinery: EBITDA dropped 73% YoY to Bt1.3 billion.
• Aromatics: EBITDA fell 69% YoY to Bt522 million.
• Olefins: Despite a 261% YoY growth, EBITDA was only Bt332 million after a weak performance in the prior year.
• Polymers & Chemicals: EBITDA recorded a loss of Bt201 million.
• Bio & Circularity: EBITDA declined 63% YoY to Bt69 million.

Full-Year 2024 Financial Overview

For the full year, PTTGC reported a net loss of Bt30 billion, a stark contrast to the Bt1 billion net profit reported in 2023. This loss was largely driven by impairment charges and SG&A expenses from PTTAC and Vencorex, amounting to Bt21.8 billion in the second half of the year.

Revenue fell slightly by 2% YoY to Bt608.6 billion, while EBITDA declined by 17% YoY to Bt34.6 billion. The net profit margin also turned negative, reflecting the industry’s ongoing challenges.

Key Challenges and Sector Outlook

The petrochemical sector remains under pressure due to declining spreads, fluctuating crude oil prices, and unplanned shutdowns. PTTGC’s adjusted EBITDA from the olefins chain dropped 90% YoY to Bt131 million in 4Q24. Moreover, the company faced an additional retroactive ethane cost of Bt600 million due to adjustments in its gas purchase agreement with PTT.

The aromatics segment also witnessed a 23% QoQ drop in spreads, driven by maintenance shutdowns and weakening market conditions.

Dividend Policy and Future Outlook

PTTGC announced a 2024 dividend payment of Bt0.50 per share, with the XD-date set for March 3, 2025, and payment scheduled for April 24, 2025. For 2025, the company anticipates increasing the dividend to Bt0.75 per share.

The 2025 net profit forecast remains at Bt5.5 billion, factoring in planned maintenance shutdowns and increased ethane usage, which is expected to rise to 38% from 28% in 2024.

Valuation and Recommendations

UOB Kay Hian maintains a “HOLD” recommendation for PTTGC, setting a revised target price of Bt21.00 based on a 0.36x 2025F price-to-book ratio (P/B) at -2 standard deviations. The report emphasizes caution regarding the petrochemical sector and suggests switching to leading stocks in the oil and gas sector, such as Bangchak Corporation (BCP) with a target price of Bt45.00 and Indorama Ventures (IVL) with a target price of Bt32.00.

Environmental, Social, and Governance (ESG) Initiatives

PTTGC has made significant strides in ESG practices:

• Environmental: The company prioritizes decarbonization and aims to achieve net-zero greenhouse gas emissions by 2050. It also promotes a circular economy in collaboration with its partners.
• Social: PTTGC supports social enterprises, reduces inequality, and enhances the quality of life for communities through education, health, and safety initiatives.
• Governance: Transparency and innovation are central to the company’s operations, with a focus on environmentally friendly chemicals for a low-carbon economy.

Final Words

PTT Global Chemical faces significant headwinds in the petrochemical sector but remains committed to its long-term strategies and ESG goals. While the stock’s current outlook warrants caution, it presents opportunities for investors with a long-term perspective. UOB Kay Hian’s recommendation to hold PTTGC and consider alternatives like BCP and IVL underscores the need for portfolio diversification in the current market environment.