KTBST Expects a Significant Growth in PTTEP’s 2Q21 Earnings, Raising a TP to ฿142

KTBST Securities (KTBST) has given a “BUY” recommendation on PTT Exploration and Production Public Company Limited (PTTEP), with a target price of 142.00 baht, in anticipation of significant growth in 2Q21 core profit both YoY and QoQ.

The BUY rating on PTTEP with a new DCF-based target price of 142.00 baht (up from  136.00 baht), based on WACC of 6.7% and no terminal growth value. KTBST projects PTTEP’s 2Q21 net profit to grow +127% YoY but to decline -15% QoQ to 9.8 billion baht. A strong growth YoY would be attributable to 1) a higher production volume from the Bongkot and an additional production from the recent acquisition of Sabah H and Oman 61 fields, 2)  an increase in average selling price (ASP) thanks to higher crude oil price, and 3) a lower unit cost from economies of scale. 

KTBST upgraded 2021-22 net profit forecast by 11-14% following the revision of 1) the Dubai crude oil price assumptions to USD64.0/bbl and USD65.0/bbl from USD60.0/bbl and  USD58.0/bbl earlier, and 2) average selling price estimates by 3-5%. However, KTBST kept its sales volume forecast unchanged at 404-493 kboed in 2021-22, compared to 354 kboed  in 2020.

PTTEP’s stock price has increased by 22% in the past six months, outperforming the SET Index by 10%, in line with an upward trend in crude oil price. The stock currently trades at 2021E PBV of 1.2x, which is +0.5 SD above its  5-yr average. KTBST expects PTTEP to  benefit from1) the stronger-than-expected global crude oil price uptrend and 2) higher sales from the existing field and additional production from acquisitions. 

Besides, there is upside potential to the target price if the company announces the final  investment decision (FID), which is expected to take place in 2022, on the Sarawak SK410B project with an initial production capacity of 600-800 mmscfd.