Company Overview: Bangchak Sriracha (BSRC)

Bangchak Sriracha, previously known as Esso (Thailand), is Thailand’s third-largest refiner by capacity. The company operates a 174kbd refinery, accounting for 16% of the nation’s refining capacity. Additionally, BSRC commands a 17% market share in Thailand’s oil retailing segment. The controlling shareholder is Bangchak Corporation (BCP), holding a 76% stake, followed by the state-owned Vayupak Fund with a 7.4% share.

Stock Performance and Market Data

BSRC’s stock is traded under the Bloomberg ticker “ESSO TB”. With a market capitalization of Bt23.5 billion (US\$660.0 million), the company has experienced significant volatility. The stock’s 52-week range is Bt10.90 to Bt6.80, and it has underperformed significantly, with a year-to-date decline of 20% and a one-year decline of 28.8%.

Major shareholders include Bangchak Corporation (76.3%) and the Vayupak Fund (8.2%). The FY24 NAV per share is projected at Bt8.54, and the FY24 Net Debt per share stands at Bt6.89.

4Q24 Performance Preview

BSRC is expected to report its 4Q24 results on February 19, 2025. Analysts predict a net loss of Bt994 million, bringing the total net loss for FY24 to Bt1.7 billion. However, core profit is anticipated to surge by 787% quarter-on-quarter to Bt664 million in 4Q24, resulting in a core profit of Bt1.6 billion for the full year.

Key Challenges and Market Developments

Share Price Underperformance

BSRC has been the worst performer in the SET100 index, with its share price tumbling 33% in January 2025, compared to the SET100 index’s 6% decline. This was primarily due to weak gross refinery margins (GRM) and concerns over Thailand’s refinery margin restructuring formula. Despite these challenges, analysts believe the share price drop has already priced in most of the negative factors.

Oil Pricing System Restructuring

The Thai government is working on transitioning from a global oil pricing mechanism to a “cost-plus” system. This new structure could cap refinery margins and regulate profits, potentially impacting profitability. However, analysts foresee delays in implementing the new Energy Act, making an announcement unlikely within this year.

Financial Projections

Despite a forecasted net loss for 2024, BSRC’s financial outlook improves significantly in 2025, with an anticipated net profit of Bt3.0 billion and a dividend yield of 7.7%.

Valuation and Recommendations

Analysts maintain a “BUY” recommendation for BSRC with a revised target price of Bt8.00, down from Bt9.00. The valuation is based on a 1.0x 2025F P/B ratio. The stock’s attractive dividend yield and its position near -2.0 standard deviations below its five-year historical mean PBV make it an appealing long-term investment opportunity.

It is important to note that every US\$1.00/bbl decrease in GRM could reduce the 2025 core net profit forecast by Bt1.6 billion.

Environmental, Social, and Governance (ESG) Efforts

Environmental

BSRC aligns with its parent company’s goal to achieve net-zero Scope 1 and 2 GHG emissions by 2050. The company has also successfully recycled over 93% of its operational waste since 2012.

Social

The company upholds high occupational health and safety standards, with a total recordable injury rate of 0.05 per 200,000 working hours and a zero lost time injury rate.

Governance

BSRC consistently achieves “Very Good” CG scoring from the Thai Institute of Directors Association.