We expect TOP to continue benefiting from strong middle distillate margins in 3Q26, supporting GIM above US$20/bbl despite the government's diesel ex-refinery price cap. High refinery utilization should help maintain competitive operating costs, while robust diesel and jet fuel demand is expected to support operations into 4Q26. We maintain our OUTPERFORM rating and Bt85/share TP, based on 0.9x PBV, supported by attractive valuation, a favorable refining outlook, and a dividend yield of more than 7%.
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TOP – 3Q26F: Earnings boosted by strong GIM
3Q26F earnings to improve QoQ on strong GIM and stock gains. We expect TOP to report 3Q26F net profit of Bt15.9bn (due November 12), up 641% YoY and 92% QoQ, driven by strong refining margins and a return to stock gains. Market GIM is expected at US$22.7/bbl despite pressure from higher freight costs and the government’s diesel ex-refinery price cut. Accounting GIM is forecast to improve to US$24.2/bbl from US$11.7/bbl in 2Q26, supported by exceptionally strong middle distillate crack spreads of over US$60/bbl. TOP’s market GRM should remain well above the Singapore benchmark, supported by its high diesel and jet fuel yield despite higher crude premiums and operating costs.
Higher refinery utilization to maintain competitive unit costs. We expect 3Q26F refinery throughput to increase, with crude run rates rising to 109% from 107% in 2Q26, as TOP maximizes utilization to lower unit costs. Despite government restrictions on refined product exports, the company appears able to optimize operations by utilizing storage facilities from the Clean Fuel Project (CFP). Operating costs are expected to remain competitive at US$2.3/bbl, flat QoQ and significantly lower than US$3.4/bbl in 3Q25, supported by higher utilization.
Higher lube base oil and LAB spreads offset weak aromatics. We expect stronger profitability from the lube base oil and LAB (surfactant) businesses to support 3Q26F earnings. Tight supply from the Middle East has lifted base oil spreads, driving GIM contribution from the segment to a record high of around US$2/bbl, above the typical US$1-1.5/bbl range. Meanwhile, the aromatics business is likely to remain a drag on earnings as PX and benzene spreads over ULG95 stay weak. However, this should be largely offset by healthy LAB margins, contributing US$0.7/bbl to GIM.
High refinery utilization to continue in 4Q26 despite freight cost pressure. We expect TOP to maintain high refinery utilization in 4Q26, supported by seasonally stronger diesel and jet fuel demand. The government’s diesel ex-refinery price cap is likely to remain in place, but the impact should be offset by strong middle distillate crack spreads amid ongoing supply disruptions. Higher logistics costs remain the key downside risk to refining margin, while crude oil price volatility could lead to earnings fluctuations despite solid operational performance.
Valuation and risks. We maintain TP (mid-2027) of Bt85/share based on 0.9x PBV, equivalent to -0.5SD below its five-year average. Our OUTPERFORM rating is also intact, supported by attractive upside potential and an estimated dividend yield of more than 7%.
Key risks: Volatile oil prices and GRM, inventory losses, weak aromatics demand, and CFP delays or cost overruns. Key ESG risks include environmental impacts and tighter GHG emissions regulations.