OR - 2Q67: อ่อนแอลง QoQ ตามคาด – OUTPERFORM (ราคาเป้าหมาย 21.70 บาท)

2Q24 net profit was Bt2.5bn (Bt0.21/share), down 32% QoQ and 8% YoY as expected, dragged by lower gross profit/liter and lower mobility segment oil sales volume. EBITDA margin and sales volume for the lifestyle segment (F&B) remained solid. It also booked a lower FX gain of only Bt93mn vs. Bt864mn in 1Q24. We expect earnings to soften QoQ in 3Q24 due to seasonal impact and continued pressure on marketing margin. We also cut TP from Bt23 to Bt21.7, based on 5-year average EV/EBITDA (2024F) of 12x. This implies PE (2024F) of 22x, lower than the 3-year average of 27x for 2021-23 and PBV of 2.2x vs. 2021-23 average of 2.9x. Maintain OUTPERFORM as the current share price weakness, down 10% over the past month vs. the SET’s -2%, is overdone.       

Mobility segment: seasonally lower sales volume. OR’s oil sales volume fell 1.4% QoQ to 6.4bn liters in 2Q24F on seasonal factors, with market share pressured by high competition and misinformation about its service stations. This also cut gross profit/liter by an estimated 18% QoQ to Bt0.9/liter, including inventory loss of Bt530mn. Retail marketing margin was also weakened by the government’s cap on diesel price at below Bt33/liter. Note that the company’s market share in 5M24 continued to drop, falling 39.6% from 39.9% in 3M24 and 42% in 2023.

Lifestyle segment: EBITDA margin wider QoQ. The lifestyle segment continued to perform well in 2Q24, driven by the food and beverage business. The segment’s EBITDA margin climbed to 27.3% in 2Q24 from 27.2% in 1Q24 on better cost and expense control. Excluding the impact of a new business, a retail health and beauty store, EBITDA margin increased to >29%. A big contributor was higher sales volume at Café Amazon, with total cups sold up 3% QoQ to a record high of 102mn cups in 2Q24. Café Amazon’s cups sold per outlet grew 1.7% QoQ on 1.3% QoQ growth in outlets.

Global segment: oil sales volume continued to rise in the Philippines. The oil business in the Philippines was again key to the segment’s profit in 1Q24, with EBITDA rising 18% YoY and 63% QoQ to Bt531mn, though the segment contributed only 12% of the quarter’s operating profit. This reflects OR’s revised strategy to make costs more competitive, hence widening its customer base.

Revise 2024F profit down by 7%; TP is cut to Bt21.7/share. We revise our 2024F by 7% to reflect the drop in oil sales volume in the mobility segment in 1H24 due to slower demand and misinformation about its service stations. Higher competition and pressure from the government also led us to trim gross profit/liter assumption to Bt0.95/liter vs. 5-year average of Bt1/liter. Upside to our forecast is the lifestyle business whose EBITDA margin continued to improve to 27-28% in 1H24 vs. our assumption of 25%. We also shave TP to Bt21.7 based on 5-year average EV/EBITDA (2024F) of 12x. This implies PE (2024F) of 22x, lower than 3-year average of 27x for 2021-23 and PBV of 2.2x vs. 2021-23 average of 2.9x.      

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.