4Q24F earnings solid, but gas cost pressuring
We expect covered companies in the utilities sector to report core earnings of Bt7.0bn in 4Q24, growing 40.7% YoY and 1.0% QoQ. We expect GULF’s earnings to stay strong, supported by added capacity. We also expect GPSC and BGRIM earnings to increase on better SPP margin (lower gas cost). With trade war worries pushing LNG price up, we raise our 2025 gas cost assumption to Bt340/MMBtu from Bt330 and lower our 2025 electricity tariff assumption to Bt4.05/unit from Bt4.15. These changes slice 16% off GPSC’s 2025 earnings and 20% off BGRIM’s. GULF’s earnings momentum looks better, backed by expectation of ADVANC’s new spectrum license. We maintain our Outperform rating on GULF with a new mid-2025 TP of Bt72 (from Bt67.5) and stay Neutral on BGRIM with a new mid-2025 TP of Bt14.9 (from Bt22.2); we downgrade GPSC to Neutral with a new mid-2025 TP of Bt31 (from Bt60)
We expect better sector earnings both YoY and QoQ in 4Q24. We project 4Q24 core earnings of Bt7.0bn for the utilities sector companies under coverage, a 40.7% increase YoY and up 1.0% QoQ. We expect GULF to maintain a strong performance, with a rise of 31% YoY and 8% QoQ, driven by: 1) full contribution of new IPP units: GPD unit 3 (capacity 662.5 MW, startup March 2024), GPD unit 4 (662.5 MW, startup October 2024), and Hin Kong Power (HKP) unit 1 (capacity 770 MW, startup March 2024); 2) the startup of its solar, solar + battery energy storage system (BESS) and solar rooftop projects, adding 605 MW in 2H24. For GPSC, we expect core earnings to leap 186% YoY and 4% QoQ, driven by better SPP margins due to a 6% YoY increase in sales volume (but decrease 4% QoQ), a 2% YoY and 6% QoQ decline in gas costs and improved performance at the Xayaburi hydropower plant due to higher water flow levels. For BGRIM, we expect core earnings to increase 6.8% YoY but fall 49.3% QoQ. The YoY improvement comes from lower gas costs and the weakening QoQ is due to foreign exchange losses eroding the contribution from associates and joint ventures.
1H25 challenging for BGRIM and GPSC on higher gas cost. We expect the sector’s core earnings to remain strong driven by better earnings for GULF, continuing to be supported by new IPP capacity as well as contribution from new projects HKP unit 2, the data center and One Bangkok’s utilities systems. However, we expect BGRIM and GPSC to be hurt by higher gas cost after a hike in global LNG price brought by rising geopolitical tension after China's Ministry of Commerce announced tit-for-tat tariffs on US imports, including a 15% tariff on US LNG, likely to raise regional LNG prices. Based on our sensitivity analysis, each Bt1/MMBtu increase in gas cost is estimated to cut profit by Bt25mn for GPSC, equivalent to +0.6% of our 2025F. At BGRIM, each Bt1/MMBtu increase in gas cost is estimated to decrease profit by Bt14mn, equivalent to +0.8% of our 2025F. At GULF, each Bt1/MMBtu increase in gas cost is estimated to reduce profit by Bt12mn, equivalent to +0.06% of our 2025F.
We expect overhangs to persist, with GULF least impacted. The sector faces short- to medium-term overhangs from both regulatory risks and potentially higher gas costs, with GULF least affected. We raise our 2025 core earnings forecast for GULF by 2% to reflect a potentially higher data center utilization rate and potential cost savings from ADVANC's new spectrum. We maintain our Outperform rating on GULF with a new mid-2025 target price of Bt72 (from Bt67.5). We revise down our 2025 core earnings forecasts for GPSC by 16% and BGRIM by 20% to reflect our new 2025 gas cost assumption of Bt340/MMBtu (from Bt330/MMBtu). We raise our 2025 gas cost assumption to Bt340/MMBtu (from Bt330/MMBtu previously) and lowered our 2025 electricity tariff assumption to Bt4.05/unit (Jan-Apr 2025: Bt4.15, May-Aug 2025: Bt4.00, Sep-Dec 2025: Bt4.00) from Bt4.15. We downgrade our recommendation for GPSC to Neutral from Outperform, with a new mid-2025 target price of Bt31 (from Bt60), and we maintain our Neutral rating on BGRIM, with a new mid-2025 target price of Bt14.9 (from Bt22.2), due to increased concerns about higher gas costs from a geopolitical trade war and greater concerns that the Thai government and regulators will try to reduce electricity tariffs, pressuring margins for SPP/VSPP operators.
Key risks: Increased regulatory uncertainty, higher-than-anticipated gas costs, and fluctuations in exchange rates. Key ESG risks are the environmental impact from exposure to fossil fuels, energy management, high greenhouse gas emission and nearby community impact.
Expect 4Q24 core earnings remain strong led by GULF. We expect utilities sector companies under coverage to report core earnings of Bt7.0bn in 4Q24, growing 40.7% YoY and 1.0% QoQ. We expect GULF to stay strong with 31% YoY and 8% QoQ growth in 4Q24, driven by a full contribution from new IPPs: GPD unit 3 (capacity 662.5 MW, startup March 2024), GPD unit 4 (662.5MW, startup October 2024), and Hin Kong Power (HKP) unit 1 (capacity 770MW, startup March 2024), and the startup of its solar, solar + battery energy storage system (BESS) and solar rooftop projects adding 605MW in 2H24. For GPSC, we expect core earnings to increase 186% YoY and 4% QoQ, driven by better SPP margins due to a 6% YoY increase in sales volume (but a 4% QoQ decrease), a 2% YoY and 6% QoQ decline in gas costs, and improved performance from the Xayaburi hydropower plant due to higher water flow levels. For BGRIM, we expect core earnings to increase 6.8% YoY but fall 49.3% QoQ. The YoY improvement comes from lower gas costs and the QoQ drop reflects foreign exchange losses hurting the contribution from associates and joint ventures
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