GRM may bottom out in 3Q21—time to accumulate

SPRC’s share prices have been hit by rising number of COVID-19 cases, high crude costs, and omission of dividend. The decision not to go ahead with the expansion project may also disappoint investors who may have hoped for new investments in growth projects. We see the capital discipline as positive.

SPRC highlighted possible near-term downside in Sep-Oct if the COVID-19 situation does not improve. Its operating rates and margins may further fall. Recovery is expected in 4Q21 when seasonal demand comes back, and in 2022 when mobility improves.

We see improving momentum of vaccination rates in Thailand. We also view that ASEAN and South Asian countries may be closer to immunity than they appear.

We revised down our forecast in FY21 by 24% to reflect the impacts of the surging outbreak and weak 3Q21. We believe that share prices have already reflected the bad news. We revised up our FY22 with slightly weaker Baht assumptions. We see the recent fall in share prices as an opportunity to accumulate for recovery in the medium term.