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Equity Analysis / Thailand

Thailand Refining & Chemical: GRM and most chemical spreads marched up

  • Headline GRM expanded WoW
  • Ethylene and Propylene spreads fattened WoW
  • HDPE and PP spreads inched up WoW

Headline GRM strengthened last week, boosted by fatter crack spreads across most product categories. We expect the consumption of refined products to rebound further, once the COVID-19 resurgence has ebbed. And that rising demand should boost GRM in the months ahead. Moreover, any supply disruption caused by the Atlantic hurricane season (which typically runs Jun-Nov) would mean scope for GRM upside. TOP is our refinery value pick, as its production cost efficiency makes its earnings profile relatively more leveraged to a rebounding GRM.

Last week, most chemical prices (particularly olefins chain) increased, buoyed by stronger regional demand and product tightness. Moreover, a sharp drop in the cost of Naphtha feedstock boosted the spreads of most downstream products. Our top Chemical pick remains IVL, as it makes compounds that are molded into essential products (which are in even greater demand in the COVID-19 era). Also, there’s scope for upside to its long-term growth profile from new acquisitions.


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