We expect 3Q24F (Nov 7) earnings to plunge to a net loss of Bt1.1bn (LPS of Bt0.09), down from profit of Bt5.2bn in 3Q23 and Bt2.5bn in 2Q24 on less profit contribution from the mobility segment from a lower marketing margin. The lifestyle (non-oil) segment’s EBITDA margin is expected to fall QoQ from expenses related to the termination of the Texas Chicken franchise. Earnings are expected to improve in 4Q24 on better marketing margin and sales volume and a rise in EBITDA margin for the lifestyle segment back to normal. We maintain our TP (2025F) at Bt24 based on 5-year average EV/EBITDA of 12x. Share price has fallen 19% (-3M) against the SET’s -8% on the low expectations for 3Q24 but with earnings growing in 4Q24 and low valuation of 13.3x P/E (2025F) vs. 3-year average of 27x, we maintain our OUTPERFORM with a TP of Bt24.
OR - Preview 3Q24F: Down into the red
Mobility segment: marketing margin hit by inventory loss. OR’s oil sales volume is expected to edge up 1% QoQ to 6.5bn liters in 3Q24F as lower retail segment sales volume due to seasonality will be offset by the commercial segment, mainly for diesel. Gross profit/liter is expected to fall 41% QoQ to Bt0.54/liter due to an inventory loss of ~Bt2bn while normalized gross profit/liter will stay within the guidance of Bt0.7-1/liter thanks to gasoline. Impact of the price cap on diesel at Bt33/liter should be lower QoQ as ex-refinery oil prices move down.
Lifestyle segment: lower EBITDA margin on extra expense. We expect the EBITDA margin of the lifestyle segment to fall to 20% in 3Q24 from 28% in 2Q24 on extra expenses related to the termination of the Texas Chicken franchise. Excluding this extra item, the segment’s normalized EBITDA margin is expected to be in line with guidance of 25-29%. Sales volume at Café Amazon is expected to fall 1% QoQ due to lower seasonal demand during the rainy season, though sales should grow 9.8% YoY due to more outlets.
Global segment: slight decline QoQ on low season. Profit contribution from the global business is expected to weaken slightly QoQ on low season in key markets like the Philippines and Cambodia. We estimate a slip in the segment’s EBITDA to 3% in 3Q24 from 3.3% in 2Q24. Notably, the EBITDA contribution will shoot up to 21% in 3Q24 vs. 11% in 2Q24 on the plunge in EBITDA in the mobility segment.
TP is Bt24 based on EV/EBITDA of 12x. OR’s share price has fallen 19% over the past three months vs. the SET’s fall of 8% on the persistent regulatory risk lying in the government’s intervention in domestic energy prices and market anxiety on poor 3Q24 earnings. We expect earnings recovery in 4Q24, which should lift market sentiment on share price. We keep our TP at Bt24, based on 5-year average EV/EBITDA (2025F) of 12x. This implies P/E (2025F) of 21x, lower than 3-year average of 27x for 2021-23 and PBV of 2.3x vs. 3-year average of 2.9x.
Risk factors: An economic slowdown would erode demand for OR’s oil and non-oil products while oil price volatility may cause more stock losses. Other risks are government intervention in capping retail oil price, particularly diesel, and higher competition and production cost that cannot be passed on.