TOP - Preview 4Q24F: QoQ turnaround expected

Share price remained pressured over the past month, losing 25% vs. the average slip of 4% for local peers, after the official announcement of a further delay in the Clean Fuel Project (CFP) and a higher investment cost, indicting pessimism on its business outlook and financial health, although management has ruled out a cash call. We believe the QoQ growth in earnings in 4Q24F may be a small near-term impetus for share price, but the market is likely to stay cautious until CFP is back on track and the startup date is more certain. We maintain our TP (end-2025) at Bt31/share, based on 0.4x PBV (2025F) and our Neutral rating despite the recent fall in share price.

4Q24F earnings turnaround expected on higher GRM. We estimate 4Q24F net profit at Bt2.3bn, reversing from a Bt4.2bn loss in 3Q24 but falling 20% YoY. The 26% QoQ surge in GIM to US$7.2/bbl will drive the QoQ earnings growth. We also expect little stock gain/loss as oil price was more stable than in 3Q24. The key contributor to GIM is better oil refining margin (~70% of total GIM), driven by crack spread of middle distillates (diesel and jet fuel) on seasonality. GIM contribution from the lube base oil business will also double QoQ to US$1.1/bbl due to favorable base oil price. Led by PX, aromatics product spread fell 36% QoQ.

Crude run stable QoQ. TOP continued to maximize crude run in 4Q24 at 113% (flat QoQ) to benefit from the improved market GRM. Hence, total intake is expected to remain high at 313-314kbd although the main crude offloading facility, SBM-2 remained offline. High crude run helped keep unit cost low in 4Q24 at US$2.5/bbl, though this rose 32% QoQ due to cost actualization in the year’s final quarter.

1Q25F outlook uncertain. Despite abnormally cold weather in 1Q25, average Singapore GRM YTD is down 33% to US$3.35/bbl against 5-year average of US$5.37/bbl for first quarter. We believe this reflects a sharp and rapid increase in crude oil price due to market concern about sanctions against oil from Russia and Iran making oil flow more difficult, while the refined oil product price adjustment is lagging. We expect market GRM to pick up its pace to reflect higher crude oil cost and seasonal demand as sentiment remains positive on the back of colder weather across parts of the northern hemisphere. We expect TOP to maintain maximum crude run in 1Q25 at 112-113% although the crude run for full-year 2025 could drop to 107-108% due to planned maintenance shutdown of CDU-3 (180kbd) in 3Q25. The previous shutdown was in 2019.

TP of Bt31 is intact. Our TP (2025F) stays at Bt31/share, based on -2SD PBV multiple of 0.4x, implying EV/EBITDA (2025F) of 9.3x. There is no near-term catalyst while the persistent risk of CFP delays and cost overruns will undermine investor appetite. We see the uncertainty over CFP as an overhang for share price in the near term and maintain our Neutral rating.

Key risks: Volatile oil price and GRM, weaker oil price causing inventory loss and lower demand for aromatics. Other risks are potential delays in CFP startup and cost overruns. Key ESG risk factors include the environmental impact of its business and GHG emission regulatory changes.