GULF – Several new growth engines are coming

Several new growth engines are coming new PDP2026 draft has released more information that is mostly in line with our report last week. The key focuses are domestic electricity demand is projected to double, driven primarily by data centers and EVs. Although the government aims to increase the share of clean energy, wind, waste-to-energy, and biomass projects face execution hurdles, shifting the focus toward solar plus Battery Energy Storage System (BESS) and gas-fired power plants. Consequently, gas-fired power plants will remain crucial for maintaining system stability, despite constraints such as scarce gas turbines, seven-year order lead times, and a two-to-threefold price increase. Nevertheless, the gas-fired power projects are expected to generate an IRR of 17% to 20%. GULF aims to capture most of the first-round allocation of gas-fired power of 2,800MW (during 2026-37), for which land has already been secured. Moreover, GULF is also interested in solar power (24,300MW during 2026-37) + BESS, supported by a strong balance sheet and low cost of debt. For the next phase during 2038-2050, GULF is expected the case 3 to be most likely targeting 194,800MW (CCGT 16,800MW, SMR 9,000MW, Solar 61,300MW, and wind 52,700MW) in new capacity additions and aiming for a renewable energy proportion to 89% by 2050.

Data center and AI business are another focus area. The government plans to release a Direct PPA regime parallel to PDP2026, which allows private power companies to sell electricity directly to data centers with no MW limit. This is not only for the data center business; it is also open to other industries like the semiconductor business that require green power as well. GULF also involves developing captive power plants dedicated to supplying electricity directly to data center sites to enhance operational efficiency and system stability, supported by its cost competitiveness advantage through its proprietary LNG terminal, enabling well-managed fuel costs compared to peers.

Furthermore, GULF is also developing its own data center with GPUs installed to expand the service scope to cover a comprehensive AI stack, integrating power infrastructure, data center buildings, hardware (GPUs), software, and enterprise solutions through its subsidiary GULF EDGE. This should provide further high-margin business contribution. GULF's initial target is to expand data center capacity to 1.5 - 2GW in the EEC area to meet the strong demand of hyperscalers. Although this business requires substantial upfront capital expenditure, particularly for processing units, the company will secure recurring income through long-term lease contracts of 10 to 20 years.

Valuation & recommendation. We maintain our OUTPERFORM rating with a mid-2027 target price of Bt78, based on DCF valuation (6% WACC and 3% LT growth). We expect GULF is well-Leading market positioning to capture growth opportunity.

Key risks: Lower return on new investments and regulatory changes. Key ESG risk is the environmental impact from its exposure to fossil fuels.