Krungsri Securities (KSS) has a positive view on Thai refinery stocks following the announcement of reduced tax rebates on exporting gasoline, gasoil, and jet fuel from Beijing that could ramp up refinery margin amid declining exports from China.
China’s government has announced a reduction in VAT rebate on exporting gasoline from the existing 13% to 9%, effective from December 1, 2024. The move is part of China’s strategy to increase domestic revenue and limit its dependency on clean oil exports.
Presently, clean oil products are taxed at 13% VAT and also draw a consumption tax for domestic sales. In order to incentivize exports, Beijing has bestowed an exemption on outbound barrels from the consumption tax and made VAT entirely refundable. These measures are indirect government subsidies designed to keep Chinese exports competitive in the global marketplace while driving economic growth.
According to KSS, this development is seen as favorable for the refining sector, particularly for Thailand’s SPRC and BCP for higher gross refinery margin next year.
KSS stated that it envisioned this signal as an opportunity to boost the profits of refining groups going forward. In the short term, the firm recommends focusing on durable basis shares that are showing quarter-on-quarter recovery in Q4 2024, specifically SPRC (Target Price THB9.5) and BCP (Target Price THB46.5).
