PTT, PTG Energy (PTG), B.Grimm Power (BGRIM) and Global Power Synergy (GPSC) are the most at risk of decline from the new government's pledge to cut electricity tariffs and retain diesel prices, according to Maybank Securities.
The brokerage assesses it is highly likely the new administration will deliver on its commitment to lower power tariffs and control fuel prices. Large energy and utility companies on the Stock Exchange of Thailand (SET) have downside risks in terms of share prices, said Maybank.
"Our research department anticipates PTT, PTG, BGRIM and GPSC have the highest downside risks. In our view, the energy policy of the new government could affect PTT's earnings estimates by 20%, while it could be 47% for GPSC in 2024," said the brokerage.
PTG is also expected to feel the pinch as most of the company's business is oil retail and most of its service stations are operated under a company-owned and company-operated model, which is most sensitive to profit margin fluctuation, according to Maybank.
Maybank evaluated that a drop of 0.1 baht per litre in petrol marketing margin could negatively affect PTG's earnings per share estimates by 10% and 32% in 2023 and 2024, respectively.
The brokerage's top picks in this category are Bangchak Corporation and PTT Exploration and Production.
Utility companies could also be at risk for falling gross margins. The tariff reduction will have a negative impact on small power producer projects, especially those of BGRIM and GPSC, said Maybank.
The research department estimates the current electricity tariff of 0.38 baht per kilowatt-hour is higher than the current fuel cost. If the government abolishes the fuel tariff, the downside risk to Bloomberg's BGRIM earnings forecast is estimated at 14% and 43% this year and next, and 17% and 47%, respectively, for GPSC.
Maybank also expects it is likely the government will ask PTT to help subsidise the price of LPG and natural gas for vehicles (NGV). PTT may have to reduce LPG sales prices in line with gas costs, creating a burden of roughly 11 billion baht per year for the company.
As for NGV, PTT now shoulders a cost of 8-10 billion baht per year. Maybank believes PTT would see its NGV price subsidy increase by another 10-12 billion baht.
"If so, there is a downside risk of 20-23% to Bloomberg's earnings estimate for PTT in 2024," the brokerage said.
