Thai refinery shares fall after authorities ask for profit contribution to subsidize fuel prices

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Thailand-based oil refineries saw their shares slump on Friday after the government said it would request them to donate their excess profits to support the oil fund for around 8 billion baht per month in the third quarter.

According to the Energy Ministry, this request is voluntary and considered a relief package for Thais who are suffering from a spike in energy prices. 

In response, shares in refineries came under pressure as investors were concerned that the move would likely lower the companies’ profits. 

“We expect the refinery market to be pressured significantly by this negative news,” said Kaweewit Thawilwithayanon, an analyst at KGI Securities. 

The drop was led by Star Petroleum Refining Plc (SPRC) tumbling 14 per cent from its prior closing to 10.70 baht at the opening.

Bangchak Corporation Plc (BCP) saw shares decline 8.53 per cent to 29.50 baht. IRPC Plc (IRPC) fell 5.45 per cent to 3.12 baht.

Subsidiaries of national oil and gas giant PTT Group, Thai Oil Plc (TOP) and PTT Global Chemical Plc (PTTGC), dipped 7 and 4.4 per cent to 49.50 and 43.25 baht, respectively. 

However, Kaweewit pointed out that two Thailand-based refineries operating under US headquarters (ESSO and SPRC) may refuse to comply with the Thai government’s request. 

KGI Securities said that if ESSO and SPRC decide not to participate in the government plans, the stocks would likely outperform others in the sector.

“We see an opportunity to accumulate SPRC and ESSO amid sky-high refinery margins this year,” Kaweewit noted.

Current diesel prices are nearly 35 baht per litre, while gasoline prices are around 45 baht per litre. In May, Thailand’s headline inflation saw a jump of 7.1 per cent year-on-year, the highest in almost 14 years. 

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