RDS

KGI Securities expected the energy sector, especially ESSO, TOP and SPRC to benefit from the shutdown of Formosa Petrochemical’s residue desulphurization unit in Taiwan after an explosion. On July 15, Taiwan's Formosa Petrochemical shut down the residue desulphurization unit (RDS#2) at its Mailiao refinery with a large capacity of 540KBD after an explosion and fire. The shutdown of RDS#2 will mainly impact the production of LSFO and also force relevant units to cut utilization rates, such as gasoline or diesel production. KGI estimated repairs of RDS#2 to take at least three months and believed refinery spreads in Asia will benefit from this accident. With KGI’s forecast of higher refinery margin after the explosion and fire at RDS#2, the security company preferred refinery companies whose refinery business contributes more than 50% of total EBITDA such as ESSO (Thailand) Plc. (ESSO), Thai Oil Plc. (TOP), and Star Petroleum Refining Plc. (SPRC). In addition, these three refineries remain KGI’s energy top picks in the short term. Each company's refinery contribution is 60%, 70%, and 100%, respectively. Meanwhile, KGI also expected Bangchak Corporation Plc. (BCP) and IRPC Plc. (IRPC) to benefit from this event as well since their refineries contribute about 30%-40% of total EBITDA.