Equity Analysis /

PTT PCL: Promising long-term prospects regardless of near-term hiccup

  • Subsidiaries to be key 2022 earnings driver

  • Promising long-term growth prospects

  • Strong balance sheet enabling both investment and dividend payment

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
2 March 2022

Despite uninspiring near-term outlook, pressured by rising gas cost, PTT’s long-term growth prospects are promising, buoyed by continual investments in backbone businesses and investments in new business frontiers. The current valuation is undemanding—a YE22 PBV of 1.1x (1SD below its long-term mean of 1.6x) with an attractive dividend yield of 4.4% for 2022 (against 2.7% for the SET).

Subsidiaries to be key 2022 earnings driver  

PTT’s earnings outlook for 2022 seems uninspiring, as the gas, chemical, and power business profits will tend to soften YoY. But better earnings of other business units—E&P, refining, oil, and trading businesses—will lend support to PTT’s earnings this year. PTT’s gas biz profit looks set to weaken YoY, due to lower sales volume of GSP and slimmer margin (a spike in gas feed cost). The firm’s gas cost will tend to rise in the 30-50% range YoY in 2022, due to higher reference oil and LNG prices. Our sensitivity analysis indicates that for every 10% higher gas cost than our base case assumption of 20% YoY increase translates into an 8% downside to our 2022 earnings forecast. Meanwhile, the chemical biz profit is likely to decline YoY, squeezed by slimmer product spreads. And the power biz profit is projected to decline YoY, due to higher fuel costs.