Thai PTT Plc profit down more than 60% year-on-year, but fourth-quarter forecasts remain optimistic

Thailand’s largest oil and gas company PTT Plc (PTT) reported a drop in profits of more than 60% year on year on the back of lower petrochemical spreads.

PTT, which has a market value close to 1 trillion baht, announced that third-quarter 2022 earnings fell to 8.88 billion baht from 23.65 billion baht recorded in the third quarter of 2021.

The decline in the third quarter of 2022 prompted PTT and its subsidiaries to report earnings before interest, taxes, depreciation, and amortization (EBITDA) of THB 92.28 billion, down THB 18.25 billion or 16.5% less than in the third quarter of 2021 in the amount of 110.52 billion baht.

PTT Group reported a net profit of 8.88 billion baht in the third quarter of 2022, down 14.77 billion baht or 62.4% from the third quarter of 2021 to 23.65 billion baht due to lower EBITDA and larger foreign exchange losses despite higher gains on derivatives.

However, there was also good news about the company’s earnings. Exploration and production performance improved due to an increased average realized prices and average sales volume. For the 9 months ended September 30, 2022, PTT and its subsidiaries reported EBITDA of THB 417.75 billion, up THB 91.06 billion or 27.9% from the first 9 months of 2021, at 326.69 billion baht.

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Positive outlook for the fourth quarter

Even with weaker third-quarter earnings, some analysts expect the company to have a better fourth-quarter report with higher oil and gas prices due to the winter season.

Q4 2022 guidance for PTT core earnings in Q4 2022 is expected to increase year-over-year due to improvements in oil production and refining. But core earnings will generally be lower quarter-on-quarter due to lower profits in the exploration and production and chemicals divisions.

Expectations of further year-over-year earnings growth in the fourth quarter of 2022 should help share prices. Also, the planned new investments will contribute to long-term profit growth. The current valuation is relatively modest: PBV of YE23 is 0.9x (1.4 SD below the long-term average of 1.6x) with an attractive 2023 dividend yield of 5.7% (versus 2.8% for SET).