Net loss of Bt2.1bn (vs. profit of Bt1.8bn in 2Q24) was in line with consensus and INVX, on huge inventory loss of US$5.45/bbl (net of hedging gain) or ~Bt3.6bn (net of tax). This turned the BCP group GRM to minus US$2.95/bbl. Operating GRM fell 81% YoY and 5% QoQ to US$2.49/bbl on an unfavorable market in 3Q24 and weak GRM for BSRC due to a high proportion of gasoline. Key support was the E&P business, with EBITDA up 38% YoY and 19% QoQ on higher sales volume and gas price. 9M24 profit was Bt2.2bn, far below projected profit of Bt11bn from the inventory loss and weak GRM in 3Q24. We thus cut our 2024 projection by 31% to Bt7.6bn and trim TP to Bt44/share, based on sum-of-the-parts valuation. With valuation undemanding at 2025F PE of <5x and PBV of 0.5x, we maintain OUTPERFORM.
BCP - 3Q24: Net loss, in line
Oil refinery dragged by lower GRM and inventory loss. EBITDA of the oil refining segment plunged to a loss of Bt1.6bn in 3Q24 with accounting GRM a minus US$2.95/bbl (-Bt2.5bn). Behind this was inventory loss of Bt3.6bn and lower operating GRM of US$2.49/bbl, reflecting BSRC’s weaker GRM, where it maximized gasoline output to serve BCP petrol stations. Crude run rose 13% QoQ to 259kbd in 3Q24 after a major turnaround at Phra Khanong refinery in 2Q24, though this was offset by lower crude run for BSRC due to a planned shutdown.
Marketing profit halved QoQ on weaker marketing margin. Oil marketing sales volume dipped 2% QoQ to 3.3bn liters in 3Q24 due to lower domestic demand and intense competition. Together with a drop in marketing margin to Bt0.7/liter, EBITDA contribution from the marketing segment sank 45% YoY and 57% YoY.
Higher contribution from power and natural resources segments. Profit contribution (EBITDA) from other businesses rose 29% YoY and 19% QoQ, largely from power (+30% QoQ) due to higher electricity sales from the hydropower plant in Laos. Natural resources EBITDA, i.e. OKEA, also increased 19% QoQ on higher sales volume and gas price. Higher feedstock cost for bio-based products continued to damage the segment’s profitability (EBITDA was -23% QoQ).
Earnings to improve in 4Q24. Stronger GRM and more stable oil price will fuel profit in 4Q24 after the poorest ever quarter in 3Q24. BCP should be able to maintain a high crude run in 4Q24 to accommodate seasonally higher domestic demand together with synergy with BSRC which will maximize crude run after a brief turndown of the refinery in 3Q24. We also expect better contribution from power on high season for solar power and natural gas power plants in the US, and the E&P segment on higher production at Statfjord area and stronger gas price.
Earnings cut to reflect weak 3Q24. As 9M24 profit was hit by inventory loss, we cut our 2024F by 31% to Bt7.6bn. We maintain our Outperform on BCP in view of its solid earnings outlook and business diversification, though SOTP TP is trimmed to Bt44 from Bt46 to reflect lower forecast earnings. This implies 3.3x EV/EBITDA (2025F) vs. 10-year average of 7.4x. Valuation is still undemanding at <5x 2025 PE; dividend yield is also attractive at 7% for the next two years.
Risks & concerns. Economic slowdown would hurt demand for refined oil products and GRM while oil price volatility may cause more stock loss. Other risks are regulatory changes on GHG emissions, asset impairments for the E&P business and government intervention in domestic retail oil price. Key ESG risk factors include the environmental impact of its business and how it adapts during the transition to clean energy.