On Friday, Thailand’s Energy Regulatory Commission (ERC) proposed an electricity tariff ranging from 4.65 baht to 6.01 baht per unit for the period between September and December, following the escalation in natural gas prices and the depreciation of the baht.
The proposed power tariff rate encompasses three price range scenarios of 4.65 baht per unit, 4.92 baht per unit, and 6.01 baht per unit.
Notably, the retail power tariff for the May-August period was maintained at 4.18 baht per unit. As the winter season approaches, an anticipation of heightened demand is expected to further drive up LNG prices, contributing to the proposed increase in electricity tariffs.
Asia Plus Securities views the proposed electricity tariff increase as a favorable development for power plant stocks, particularly the SPP power plant group. This group, which caters to industrial clients with an electricity structure tied to the Ft rate, includes companies like GPSC, BGRIM, and GULF. The adjustment of the Ft rate is anticipated to raise gross profit margins for these companies, enabling them to potentially enhance debt repayments to government and state entities.
The analyst advised investors to consider strategic entry points for investing in GPSC and BGRIM, offering target prices of THB 55 and THB 34, respectively. For GULF, a long-term investment approach was recommended, with a target price set at THB 56.
Kasikorn Securities (KS) projected that the adjustment of the Ft rate would strengthen the 4Q24 earnings of GPSC and BGRIM, following an anticipated quarterly performance slowdown in 3Q24 attributed to the increasing LNG costs.
The analyst gave a ‘BUY’ recommendation for GULF, GPSC, and BGRIM at THB 50.50, THB 60, and THB 34.5, respectively.
