BGRIM – 3Q24: Below consensus on FX loss impact

We expect 4Q24 earnings to improve YoY due to a higher electricity tariff and higher electricity sales volume after a full quarter of operations at its BGPAT 2&3 projects. We maintain our Neutral rating on BGRIM with a target price of Bt24.5 on DCF valuation (WACC: 4.6%, terminal growth: 1.0%), as there is no major near-term catalyst.

3Q24 results miss consensus at Bt163mn, -52.7% YoY and -28.8% QoQ. Behind the drop in net profit both YoY and QoQ was higher unrealized FX losses. Operating profit in 3Q24 was Bt808mn, up 32.7% YoY and 35.3% QoQ, due to unusually high development fees for projects of ~Bt200mn in Korea and Japan, recorded as service revenue. It also recorded insurance claim compensation of Bt120mn in 3Q24 from the incident at ABP3 power plant.

3Q24 highlights. Revenue grew 11.0% YoY on higher electricity sales volume of 3,908 GWh plus higher steam sales volume and ASP tagging higher gas price. Gross margin fell 130bps YoY and 90bps QoQ to 19.1% in 3Q24, on the impact of a 14.3% YoY and 12.1% QoQ rise in gas cost to Bt336/MMBtu off abnormally low gas costs in 2Q24 following retroactive benefits received early in 2024.

4Q24 outlook. We expect core earnings to improve YoY on a higher electricity tariff to reflect the higher gas cost and the higher electricity sales volume after a full quarter of commercial operations of its BGPAT 2&3 projects. However, core earnings are expected to soften QoQ on an anticipated increase in gas costs during the peak winter season. Excluding the gains from development fees and insurance compensation, 9M24 operating profit accounted for 76% of our full-year forecast.

Takeaway from meeting. BGRIM’s management expects SPP gas prices to range from Bt310-340/MMBtu in 2025, slightly lower than 2024’s Bt320-350/MMBtu. This downward trend is attributed to an increased supply of domestically produced gas to the pool gas, which is priced lower than imported gas. To further reduce gas costs, BGRIM plans to import five LNG cargos next year, up from two this year. This will help save on gas costs by avoiding the Bt5/MMBtu margin paid to PTT. Based on our analysis, each cargo import is estimated to save ~Bt17mn in gas costs. In 4Q24, BGRIM expects to acquire new industrial customers (IUs), taking 10-15MW. Additionally, KOPOS (10MWe) and U-Tapao (18MWe) projects are expected to commence operations by the end of this year or early next year. For the medium to long term outlook, BGRIM forecasts growth in its electricity demand of 400-600MW over the next 3-4 years, driven by increasing demand from data centers and new industrial customers. The initial phase is expected to contribute an additional 100-200 MW.

Key risks. Higher than expected gas cost and delayed adjustment of Ft rate to catch up with fuel cost. Key ESG risks are the environmental impact from its exposure to fossil fuels, energy management, high greenhouse gas emission, and nearby community impact.