LNG price volatility has added uncertainty to the profit forecasts for SPP-heavy stocks. Among Utilities plays, we prefer GULF for its strong long-term earnings outlook and scope for upside.
Gas price surge hits SPPs
Our models point to an aggregate Utilities coverage 1Q22 core profit of Bt2,168m, down by 56% YoY and 35% QoQ, led south by the gas price surge (we assume a mean 1Q22 pooled gas price of Bt380/MM Btu, up by 103% YoY and 25% QoQ, due to the slump in output at the Erawan gas field and the LNG price spike), which will have outweighed the effect of a higher electricity price (the mean 1Q22 retail electricity price was Bt3.77/kWh, up by 5% YoY and QoQ). High fuel costs in the face of only a small electricity price increase squeezed SPP margins, so both BGRIM and GPSC may mark core losses for the quarter (but GPSC will mark a net profit, due to an extra gain from selling a solar farm in Japan).