PTT – 3Q24: Sharp fall QoQ and YoY as expected

PTT’s 3Q24 net profit fell 48% YoY and 54% QoQ to Bt16.3bn, in line with INVX but below market estimates. This was due to loss contribution by the P&R* segment, which suffered from huge stock losses and poor product spread. An offset was provided by huge gains from FX and derivatives of Bt29bn. Weaker profit at the E&P and oil businesses also dragged on profit while gas business profit improved QoQ, though still fell YoY.

Operating net profit weakened 17.7% YoY and 14.1% QoQ to Bt25.8bn. We expect profit to recover strongly in 4Q24 on higher profit at E&P and gas businesses, plus an earnings turnaround at P&R and oil marketing segments. With 9M24 profit at Bt80.8bn (77% of full-year forecast), our earnings target should be achievable. Current share price is undemanding at 0.8x PBV (2025F) and 7.9x P/E vs. 10-average of 1.3x and 14.6x. Dividend yield of 6.1% is compelling. Outperform rating is maintained with TP of Bt41.

Poor performance at P&R and oil marketing dragged 3Q24 profit. The fall in oil prices in 3Q24 caused huge inventory losses at P&R associates. Coupled with poor market GRM and petrochemical product spreads, P&R segment operating profit fell into a loss of Bt16bn in 3Q24 vs. a profit of Bt7.3bn in 2Q24, plus PTTGC booked asset impairment of Bt8.2bn. Earnings at the oil marketing business were also discouraging, with operating profit falling to only Bt220mn from Bt3.2bn in 2Q24 despite a slight 1% QoQ increase in sales volume. Oil segment earnings were hit by weaker gross profit/liter at only Bt0.51/liter compared to the usual Bt0.7-1.2/liter on the damage done by inventory losses and extra expenses related to the termination of a franchise in the F&B segment.

Profit of gas business up QoQ while E&P slipped. Gas sales volume declined 7% YoY and 11% QoQ to 4,285mmcfd on a drop of 12% YoY and 17% QoQ in power sector demand, reflecting seasonal impact and higher hydropower generation. GSP sales volume slid 3% YoY and 2% QoQ to 1.75mt on lower gas supply from the Gulf of Thailand due to maintenance shutdowns of several gas fields. Operating profit of the gas business grew 13.4% QoQ on an earnings turnaround at the GSP business due to lower gas feedstock cost. E&P operating profit fell 15.8% YoY and 22.2% QoQ on lower sales volume. Gas and E&P businesses contributed the most to 3Q24 core profit, offsetting losses from P&R.

4Q24F operating profit to recover QoQ on better profit from E&P. We expect E&P to remain the key profit support in 4Q24 after winding up the planned maintenance of gas fields in the Gulf of Thailand. This will also support GSP operations. We expect a higher market GRM for the P&R segment in 4Q24F, driven by crack spread for middle distillate products, and lower stock losses.

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.