Petrochemicals – PTTGC–SCGC JV: toward final agreement

Confirmatory due diligence underway with specific JV assets identified. PTTGC and SCG Chemicals (SCGC), a wholly owned subsidiary of SCC, are currently progressing through confirmatory due diligence and negotiating key transaction terms for their proposed Thai joint venture. The scope of the transaction remains substantial, encompassing both parties' Thai petrochemical assets centered in Map Ta Phut. PTTGC is expected to hold a majority stake in the new JV, while SCGC will retain a significant minority equity position.

PTTGC and SCGC define asset scope for proposed petrochemical integration. PTTGC’s scope includes its olefins crackers, polyethylene (PE) plants, and its equity investment in HMC Polymers. This leaves the refinery, aromatics complex, biochemical business, and performance chemicals business (primarily allnex) under PTTGC. SCGC’s scope includes its olefins crackers, PE, and polypropylene (PP) plants, along with specific Thai joint ventures (JVs), namely Siam Polyethylene, Siam Synthetic Latex, Thai MMA, and Bangkok Synthetics. Not all of SCGC’s JVs, nor SCC’s Long Son Petrochemical (LSP) plant, are included in the transaction. Both parties are actively evaluating potential synergies and preparing to seek formal shareholder approvals from the respective JV entities.

Clear disclosures will be in October 2026. Clear disclosures in October 2026 will allow us and the market to precisely model earnings accretion, balance sheet impacts, and valuation upside for both parent entities, including: 1) exact finalized shareholding split between PTTGC and SCGC, 2) quantified synergy estimates and asset valuation methodologies, and 3) accounting treatments and financial integration mechanics. Full corporate integration and operational merger are projected for around mid-2027, following regulatory clearances and shareholder approvals.

Execution risks and regulatory issues. The transaction requires approval from the Trade Competition Commission of Thailand (TCCT), a process expected to take around 3-6 months. Management does not view antitrust clearance as a major hurdle, given that petrochemicals are globally traded commodities priced on international markets; the JV is aimed at operational efficiency rather than domestic price control.

Limited near-term financial impact; execution and timeline risks remain key. Although we believe the transaction should be positive for both parties over the medium to long term, investors should not expect an immediate earnings or valuation impact until the value of synergy benefits, valuation metrics, and the final shareholding structure are formally disclosed. Beyond execution risks, the prolonged global petrochemical downcycle could dilute near-term synergy gains. Key details regarding valuation, capital structure, and dividend implications have yet to be announced. As such, long-term upside will depend on the credible quantification of cost synergies and successful integration ahead of the targeted completion by mid-2027. The October 2026 disclosures will be a key catalyst for reassessing investment assumptions and valuation models.

No change on ratings and TPs. We view this milestone as a strategic positive for both companies. Moving to confirmatory due diligence supports our view that meaningful synergies can be unlocked by combining PTTGC’s upstream assets with SCGC’s downstream platform. PTTGC (TP: Bt63) remains our top sector pick, supported by lower exposure to Middle Eastern feedstock, stronger gas-based olefins margins, and a controlling position in the proposed platform. We maintain NEUTRAL on SCC (TP: Bt276), as valuation upside is likely to remain limited until synergy targets, governance structures, and transaction details are finalized.