Heavier demand for both refined petroleum and chemical products will fatten GRM and most chemical spreads through 2Q21. Moreover, the CODs of new projects will boost volume. Hence, PTTGC’s core earnings look set to rise through 2Q21. Delays to the start-ups of industry-wide new capacity would mean scope for upside to spreads and profit. The stock currently trades at a YE21 PBV of only 0.9x (1SD below its long-term mean of 1.1x).
Stronger numbers across all units to boost 1Q21 core earnings
PTTGC now looks set to post stronger 1Q21 numbers than the market had previously envisaged. We estimate a 1Q21 net profit of Bt9,530m (a YoY turnaround and up 49% QoQ), driven by expected gains on inventories and a better operational performance. Stripping out extra items, core earnings are projected at Bt7,710m (a YoY turnaround and up 76% QoQ). The drivers of the modeled core operational bounce were: 1) a greater QoQ crude run (demand recovery), 2) higher utilization rates at aromatics plants (greater demand), 3) a fatter QoQ GRM (refined product crack spread expansion), 4) fatter YoY and QoQ spreads for most chemical products (stronger demand and tight supply), and 5) bigger YoY and QoQ profits among associates (Figure 1-2).