Net profit was Bt35.5bn in 2Q24 (+76% YoY and +22% QoQ), above consensus and INVX estimates on non-recurring gains on derivatives. Net operating profit rose 50% YoY and 23% QoQ to Bt30bn, driven by E&P due to higher sales volume and EBITDA margin; gas business profit fell both YoY and QoQ due to higher gas cost for the GSP business under the single gas pool price which turned that segment’s EBITDA to negative. 1H24 profit accounts for 62% of our 2024F, which we revised down by 4% to incorporate the actual extra items in 1H24. We expect earnings to soften in 3Q24 on lower profit for gas and E&P businesses due to a planned shutdown and lower GSP production although this will be offset by better P&R profit on a better market GRM. We maintain our sum-of-the-parts TP of Bt45/share and reaffirm our Outperform rating. Lower profit from gas business. Although gas sales volume grew 7.6% QoQ to 4,837mmcfd, its contribution to profit fell 32% YoY and 26% QoQ on higher gas cost for gas separation plants (GSP) under the newly imposed single gas pool price scheme. This slashed GSP’s quarterly EBITDA by Bt1.3-1.4bn in 1H24 and turned its EBITDA to a loss of Bt1.6bn in 2Q24 due to booking the retroactive impact of the higher cost in 1Q24. Demand for gas increased QoQ on higher gas consumption by the power sector (+9.9% QoQ) upon the startup of a new power plant in March (Gulf PD Block 3) but dropped YoY as hydropower plants supplied a greater proportion. Despite a full-quarter operation of Block G1/61 (Erawan) at 800mmcfd as specified in the PSC, gas sales volume to GSP was flat QoQ on planned maintenance shutdowns in 2Q24. Gas segment profit was supported by a Bt4.3bn gain from divesting 50% interest in LNG terminal 2 to EGAT. The international trading business contributed a higher operating profit (+27% YoY and 124% QoQ) on FX and hedging gains.
P&R and oil profit down QoQ on narrower margin. P&R operating profit fell 52% QoQ due to a 53% QoQ plunge in market GRM, though with some offset by inventory and oil price hedging gains, and a slight rise in petrochemical product spread in the aromatics chain. Sales volume for the oil marketing business via OR dropped 7.6% YoY and 1.5% QoQ in 2Q24 on lower seasonal demand for travel in Thailand and lower diesel consumption in the power sector as natural gas price is normalizing. Inventory loss and higher competition dragged gross margin/liter down 4% YoY and 18% QoQ to Bt0.92/liter. 3Q24F operating profit to fall QoQ on lower E&P profit. Although E&P profit will remain key in 3Q24, the maintenance planned will pull the segment’s profit down in 3Q24. This will also affect GSP production and drag down the gas business profit. Some compensation will be provided by higher market GRM for the P&R segment, in our view, as market GRM has already recovered 28% QoQ to US$4.44/bbl. We revise our 2024F net profit forecast down 4% to fine tune with extra items in 1H24. Sum-of-the-parts TP of Bt45 is intact.
Key risks: An economic slowdown would erode demand for PTT’s energy and petrochemical products while oil price volatility may cause more stock loss. Other risks are asset impairment, losses from asset divestment, regulatory changes on GHG emissions and the government’s intervention in the retail oil business. Key ESG risk factors are the environmental impact of its business and how it adapts during the transition to clean energy. |