Equity Analysis /
Thailand

B Grimm Power PCL: Rock bottom—the best entry point!

  • Power price surge ahead

  • Gas price will remain high, but no longer a problem

  • BGRIM saw the future (and booked cheap LNG cargoes) in 2020

Bualuang Securities
27 July 2022

Of the Utilities stocks we cover, BGRIM looks set to benefit the most from the upcoming electricity price surge. And we don’t think a future gas price spike would slam BGRIM’s profitability again, as EGAT can’t take more losses (so going forward, the power price must rise faster than the pooled gas price). Apart from the strong recovery outlook, there is scope for upside to our current earnings projection tied to LNG imports (expected in 2023).

Power price surge ahead  

Our recent Utilities report (What EGAT’s financial numbers tell us, Jul 1) discussed EGAT’s financial losses tied to the slow Ft rate rise in the face of a fast-rising pooled gas price. EGAT cannot carry that burden much longer; it recently asked the ERC to increase the power price for the Sep-Dec period to Bt6.13/kWh. At that price EGAT could clear the burden it has built since Jan 2022. But the ERC is considering three scenarios (Figure 3). Scenario-1 would clear EGAT’s burden within a year; scenario-2 would clear EGAT’s burden within two years; scenario-3 factors in only a gas price hike, not EGAT’s burden. We conserv-atively assume scenario-3 in our model. Meanwhile, the gas pooled price dived 22% MoM in May, implying that SPPs’ GM hit bottom in Apr.