Preview 4Q24F: QoQ turnaround expected
We expect OR to report 4Q24F net profit of Bt2.6bn (Feb 11), turning around from a net loss of Bt1.6bn on higher gross profit/liter in the mobility segment and a normal EBITDA margin for the lifestyle segment after the prior quarter’s hit from extra expenses related to the termination of the Texas Chicken franchise and JV investment loss. Share price is down 25% over the past three months vs. the SET’s -13%, reflecting concern on government intervention in the energy sector. We believe this is largely priced in given current valuation at only 6x EV/EBITDA (2025) vs. 3-year average of 27x. We stay OUTPERFORM with a TP (end-2025) cut to Bt16.40 based on EV/EBITDA of 8.4x, a 30% discount to the 5-year average.
Mobility segment: marketing margin to recover QoQ. OR’s oil sales volume is expected to increase 9% QoQ to a record 7.1bn liters in 4Q24F, driven by high seasonal demand in both the retail and commercial segments. Gross profit/liter is expected to jump 57% QoQ to Bt0.8/liter on drop in inventory loss to only Bt40-50mn vs Bt2.9bn in 3Q24, while gross profit/liter will return to a normal range of Bt0.9-1/liter thanks to gasoline, given the price cap on diesel at Bt33/liter. Ministry of Energy data suggests diesel marketing margin fell 3.8% QoQ in 4Q24.
Lifestyle segment: EBITDA margin should be back to normal. We expect the lifestyle segment EBITDA margin to return to the usual ~26% in 4Q24 after sinking to 20.2% in 3Q24 from extra expenses related to the termination of the Texas Chicken franchise. The QoQ improvement in EBITDA margin also reflects improved profitability at the new health and wellness business, the health and beauty retail outlets Found & Found. Sales volume at Café Amazon is expected to rise 5% QoQ to a record 103mn cups due to seasonal demand and more outlets (+3% QoQ). We estimate cups sold/outlet to increase 2.2% QoQ.
Earnings to soften QoQ in 1Q25. Earnings will soften QoQ in 1Q25 on lower sales volume for the mobility segment despite better marketing margin (lower inventory loss). Sales volume of Café Amazon may fall QoQ after high season in 4Q while EBITDA margin for the lifestyle segment should stay in the normal range of 25-27%. We expect more investment in the food & beverage business in 2025F to replace Texas Chicken in view of the 84% jump in the investment budget for the lifestyle segment in 2025. This is expected to be announced in 1H25.
TP cut to Bt16.4 based on EV/EBITDA of 8.4x. We revise our 2024F down 8% to incorporate our 4Q24 earnings estimate, trimming gross profit/liter assumption to Bt0.83/liter vs. 5-year average of Bt1/liter. We also cut TP to Bt16.40 based on 8.4x EV/EBITDA, implying a 30% discount to 5-year average EV/EBITDA of 12x. This implies PE (2025F) of 17x, lower than the 3-year average of 24x for 2022-24 and PBV of 1.7x vs. 2022-24 average of 2.2x.
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.
