Equity Analysis /

Thailand: Utilities - Gas price to rise further; a pause on SPP plays

  • Our projections seem conservative compared to street, but…

  • …there’s risk of substantially higher generating costs for SPPs

  • IPPs and renewables are the only choices for 2022

Bualuang Securities
7 April 2022

Our pooled gas price assumption is high and our earnings projec-tions for SPP plays are low compared with street numbers. That said, we still see profit downside risk for SPPs—the gas price has yet to peak and the market hasn’t fully priced in the weak 1H22 outlooks of SPP-heavy stocks. Hence, IPP and renewable plays remain our preferred choices. GULF is our top Utilities pick.

Our projections seem conservative compared to street, but…

We assume a mean 2022 pooled gas price of Bt345/MM btu, up 48% YoY. A high gas price predicates weak outlooks for SPP-heavy stocks. Our 2022 core earnings projections are Bt1,605m for BGRIM (down 34% YoY) and Bt4,007m for GPSC (down 37% YoY)—the lowest core profit forecasts for the two firms among analysts surveyed by Bloom-berg. But the stock prices of BGRIM and GPSC are down YTD by only 18% and 19%, respectively, so we don’t think the market has fully digested the scale of the gas price increase or its consequences. Hence, we expect those stock prices to fall further—especially if both firms mark red ink on their respective 1Q22 and 2Q22 bottom-lines.