UHV project tried and tested

COMPANY RESEARCH | Company Update

OUTPERFORM

October 6, 2016

IRPC (IRPC TB) Share Price: Bt4.98

Target Price: Bt6.00 (+20.5%)

UHV project tried and tested




Expect core earnings to soften qoq to Bt1.4bn in 3Q16, dragged by weaker GIM and the absence of stock gains (Bt2.2bn in 2Q16) Full-year contribution from UHV project, Everest program, and PP capacity expansion to drive earnings in FY17F OUTPERFORM, rolled over valuation base to FY17F to derive Bt6.0/sh TP, pegged to 1.3x PBV. IRPC is the real transformer

Expect softer qoq core earnings in 3Q16, in line with market IRPC is in a major transition to shift its output to more premium products. This picture remains solid despite short-term hiccups in 3Q16 triggered by softer GRM and petrochemical spreads. The UHV project is behind schedule in terms of utilization ramp-up because of the extended trial period for experimenting with different crude intake, to allow IRPC to mix Arab Light crude (50%) with other crudes to optimize crude run and GIM. This led to low utilization of 70% for the project in 3Q16, but IRPC expects to ramp up utilization to 80-90% this month. Given softer GIM (US$0.5/bbl qoq) and absence of stock gain, we expect IRPC to book Bt1.4bn core earnings vs. Bt2.2bn in 2Q16. UHV project, Everest efficiency program, and PP capacity expansion to drive earnings in FY17F The UHV project will produce 1.5m tons of output, comprising propylene (320kt), naphtha (280kt), diesel (324kt), and the rest by-products. IRPC will initially convert propylene to gasoline pending the completion of the new PP capacity (+300k tons to 775k tons) in July 2017. The latter is 60% complete now and scheduled for COD in June 2017. Based on current product prices, we estimate the UHV project will add US$1.5/bbl to its normal GIM of US$13-14/bbl. IRPC is also targeting Bt3.5bn cost savings next year under the Everest program. The bulk of the benefits will be derived from operations, adjusting plant parameters to accept larger sour crude intake and reduce fuel loss in production. Everest should reduce fuel loss by 1-2ppt to 5-6%, albeit still higher than peers’ average of 3%, due to its long production chain from refinery to petrochemicals. This fuel loss reduction would boost GIM by US$0.5/bbl based on current crude oil price at US$50/bbl. Maintain OUTPERFORM, raised TP to Bt6.0/sh; IRPC is the real transformer Our TP is pegged to 1.3x FY17F P/BV. The stock is currently trading at 7.6x FY16F PE, or almost 30% discount to its past 12-months’ average, when IRPC’s earnings were starting to normalize. IRPC does not have other large committed CAPEX post-2017. Hence, cash flow should turn positive from this year and net D/E would drop to 0.3x in FY17F from Bt0.7x at end 2Q16. Financial Summary (Btm) Year to Dec Sales (Btm) Growth (%) EBITDA (Btm) Growth (%) Recurring profit (Btm) Growth (%) Net profit (Btm) FDEPS (Bt) Growth (%) PE (x) DPS (Bt) Yield (%) BVPS (Bt) P/BV (x)

2014 281,589 (4) (769) (109) (5,235) (734) (5,235) (0.26) (734) (19.4) 0.08 1.6 3.32 1.5

2015 214,172 (24) 19,890 (2,686) 9,402 na 9,402 0.46 (280) 10.8 0.08 1.6 3.71 1.3

2016F 175,311 (18) 21,684 9 11,510 22 11,510 0.56 22 8.8 0.23 4.5 4.20 1.2

2017F 203,473 16 25,655 18 13,459 17 13,459 0.66 17 7.6 0.26 5.3 4.63 1.1

2018F 220,654 8 26,481 3 13,932 4 13,932 0.68 4 7.3 0.27 5.5 5.05 1.0

Naphat CHANTARASEREKUL 662 - 659 7000 ext 5000 [email protected]

Key Data 12-mth high/low (Bt) Market capital (Btm/US$m) 3m avg. turnover (Btm/US$m) Free float (%) Issued shares (m shares) Major shareholders: -PTT PCL -GOVERNMENT SAVINGS B -THAI NVDR CO LTD

5.30 / 3.86 101,763 / 2,927 567.6 / 16.3 52 20,434 38.5 9.5 8.2

Share Price Performance

Absolute (%) Relative to index (%)

YTD

1Mth 3Mth

12Mth

15.8 (1.4)

3.7 2.0 2.6 (2.1)

23.3 12.5

Krungsri Securities vs Market Positive Market Recommend

17 Krungsri Target Price (Bt) 6.0 ’16 Net Profit (Btm) 11,510 ’17 Net Profit (Btm) 13,459

Neutral 3 Market 5.7 10,388 10,612

Negative 1 % +/5.1 10.8 26.8

Krungsri's earnings revision Earnings revision (%)

2016F

2017F

-

-

Source: Bloomberg, Krungsri Securities

Disclaimer: This publication constitutes information disclosed to the public and believed to be reliable but its accuracy and completeness are not guaranteed. All opinions, suggestions, or projections are for informational purposes only and shall not be construed as an inducement for the sale or purchase of securities. Amendments to this publication may be made without prior notice. Investors are urged to exercise caution in making a decision to invest in any securities.

1

October 6, 2016

Company Update | IRPC

Ramping up UHV project to 90% in 4Q16 from 70% now We recently spoke to the management. The UHV project seems to be running behind schedule in terms of utilization due to the longer trail period as it experiments with different crude intake. IRPC previously used 60-70% Arab Light crude but wants to reduce that to 50%. Different crude intakes would allow IRPC to optimize crude run and GIM. The UHV project has been running at 70% average utilization in 3Q16 and should reach 80-90% soon. IRPC expects to earn additional US$1.5/bbl GIM in 3Q16. But market GRM had weakened qoq in July and August, albeit rebounding in September. We expect IRPC’s GRM to drop to US$0.8/bbl from US$1.4 in 2Q16. IRPC is in the process of claiming compensation for the delay of UHV project from its EPC (engineering, procurement, and contracting) company. The contract allows IRPC to claim up to maximum US$150m of total construction cost of US$1.2bn. But the final compensation will be subject to the negotiation of both parties. IRPC may receive only some of the compensation e.g. 20-30%, and this should be finalized by 1Q17 and booked as other income. Crack spreads over Dubai Crude Oil Dubai

Jet

1Q14 104.46 17.01 2Q14 106.13 14.29 3Q14 101.45 14.50 4Q14 74.40 17.71 1Q15 51.89 17.08 2Q15 61.30 13.47 3Q15 49.74 10.88 4Q15 40.71 14.09 1Q16 30.42 11.68 2Q16 43.18 11.15 3Q16E 43.30 11.20 Source: Company data, Krungsri Securities

Gas Oil

Fuel Oil

17.78 16.04 14.43 15.99 16.29 13.74 10.81 13.77 9.62 10.51 10.60

(8.51) (10.65) (8.44) (5.62) (1.86) (3.56) (8.11) (6.55) (5.18) (8.76) (4.50)

Gasoline IRPC's GRM 14.56 16.06 13.18 13.44 15.35 19.78 19.32 18.68 18.82 14.45 11.20

1.3 0.6 0.9 2.8 5.2 3.8 2.4 4.4 3.2 1.4 0.8

For petrochemicals, IRPC should continue to enjoy healthy spreads. Spreads of PP over naphtha inched up 2% qoq to US$700/ton in 3Q16. HDPE spreads also inched up but IRPC produces HDPE pipe grade which commands US$100-150/ton higher spreads than the normal packaging grade, and pipe grade spreads softened by US$50/ton qoq to US$850/ton. Styrenics (ABS, PS and EPS) margins have been relatively flat qoq; hence, we expect product-to-feed margin to soften slightly qoq. And, given stable (qoq) crude oil prices in 3Q16, we expect IRPC to post Bt1.4bn core earnings, down from Bt2.2bn in the previous quarter. IRPC will also book Bt400m extra income from DTA in 3Q16, taking its bottom line to Bt1.8bn vs. Bt3.7bn in 2Q16.

Krungsri Securities Research

2

October 6, 2016

Company Update | IRPC Polyolefins: Prices and spreads

Polystyrenics: Prices and spreads

Source: Company data

Source: Company data

IRPC: Market product to feed for petrochemical products

Source: Company data

IRPC: Capacity Business Unit

Unit

2015

2016F

2017F

Note

Refinery

KBD

215

215

215

Diesel & Jet (38%), gasoline (10%). Lube base (10%), Naphtha (21%), LPG (5%), Fuel oil (8%), Olefins (8%, from UHV)

114 132 121 320 600 140 475 260

114 132 121 320 600 140 475 260

114 132 121 320 600 140 775 260

Captive demand (used to produce SM) sold outside sold outside sold outside sold outside sold outside sold outside Captive demand for producing Styrenics

179 125 30

179 125 30

179 125 30

sold outside sold outside sold outside

360 412 56 25

433 732 56 25

433 732 56 25

Captive demand, sold outside Captive demand for producing PP, some purchased from PTTGC Captive demand (used for producing ABS) sold outside

Aromatics (BTX) - BZ KTA - TO KTA - MX KTA Lube base oil KTA Asphalt KTA HDPE (pipe grade) KTA PP (+300kt from PPE + PPC) KTA SM (feedstock for Styrenics) KTA Styrenics - ABS KTA - PS KTA - EPS KTA Olefins - Ethylene (+73kt from UHV) KTA - Propylene (+320kt from UHV) KTA - Butadiene KTA Polyol KTA Source: Company, Krungsri Securities

Krungsri Securities Research

3

October 6, 2016

Company Update | IRPC

PP capacity expansion to support earnings in FY17F; current PP price implies extra US$1.5/bbl GIM The UHV project will produce 1.5m tons of output, comprising propylene (320kt), naphtha (280kt), diesel (324kt), ethylene and by-products. All the propylene is currently used to produce PP. IRPC plans to convert propylene into gasoline initially, while waiting for the PPE (160k tons) and PPC (140k tons) facilities to be completed by July 2017 (delayed by one month). Both projects were 60% complete as of September. IRPC will sell gasoline in the domestic market at a premium rather than sell propylene at current prices. Based on current propylene price, we estimate the UHV project will add US$1.5/bbl to it normal GIM of US$13-14/bbl. PPE and PPC command US$100-150/ton higher prices than normal PP grade products. Based on current market prices, the UHV project would change IRPC’s EBITDA mix to 20% petroleum, 60% petrochemicals and 20% utilities from 30%:50%:20%. IRPC will become a petrochemical producer with greater weight in downstream resins, which will make its earnings less volatile. IRPC will also be the largest PP producer in Thailand and second largest in Southeast Asia. UHV production yield

Fuel internal loss, 249kta, 17%

Fuel Oil, 215kta, 15%

Ethylene, 73kta, 5%

Propylene, 320kta, 22%

Naphtha, 280kta, 19%

Diesel, 324kta, 22%

Source: Company, Krungsri Securities

Top PP producers in Southeast Asia Company Country Exxon Mobile Singapore IRPC Thailand HMC Polymers Thailand TPP Thailand TPC Singapore Chandra Asri Indonesia Polytama Indonesia Lotte Chemical Malaysia Nghi Son Vietnam JG Summit PC Philippines Source: Company, Krungsri Securities

Krungsri Securities Research

2016 860 475 866 720 625 480 386 373 185

2017 860 775 866 720 625 480 386 373 370 185

2018 860 775 866 720 625 480 386 373 370 185

4

October 6, 2016

Company Update | IRPC Net D/E to improve to 0.3x in FY17F

IRPC has a Bt12.6bn CAPAX budget for FY16F and this will drop by about half to Bt6.5bn in FY17F. The bulk will be utilized to complete the PPC and PPE projects and the rest for maintenance. We forecast IRPC will generate Bt15bn EBITDA this year and Bt18.9bn next year. IRPC would have to pay Bt2.2-2.3bn/year interest expense. IRPC does not have other large committed CAPEX post-2017. Hence, we expect cash flow to turn positive from this year onwards while net D/E would drop to 0.3x in FY17F from Bt0.7x at end 2Q16. IRPC had Bt56bn outstanding debt at end 2Q16. Of this, Bt20bn will expire in mid2017 but IRPC is prepared to refinance Bt15bn of that at lower interest rate of 3.5% p.a. vs. the current average cost of funds of 4.08%. On this note, we expect IRPC to save Bt100-150m in interest expense in FY18-19F. IRPC: CAPEX plan for FY16-20 2016 UHV project 3,155 PPE & PPC projects 2,638 Delta / Delta Plus 56 Other projects 2,161 Maintenance project 4,550 Total 12,559 Source: Company, Krungsri Securities

2017

2018

2019

2020

2,378 2,378

2,631 2,631

2,522 2,522

3,079 130 972 2,360 6,542

Cost savings from Everest program to boost earnings in FY17F IRPC is hiring a consultant to boost efficiency in all areas under the Everest Efficiency Program. It is targeting Bt10bn cost-savings over three years (FY16-18F). The consultant fee will be 10% of the cost savings if it meets the target. IRPC is targeting Bt3.4bn savings this year but has so far achieved only Bt677m in 1H16. We are assuming Bt2.7bn cost savings for this year but see risk that IRPC might not achieve that. The bulk of the benefits will be derived from operations which would take time to bear fruit, including plans to adjust plant parameters to accept a larger variety of crude and reduce fuel loss in production. IRPC operates a long production chain from refinery to petrochemicals which currently results in about 6% fuel loss vs 3% for peers. IRPC expects that to drop to 4-5%. IRPC is also targeting Bt3.5bn cost savings next year under the Everest program.

Krungsri Securities Research

5

October 6, 2016

Company Update | IRPC Highlights of Everest Efficiency Program

Source: Company, Krungsri Securities

Maintain OUTPERFORM, raise TP to Bt6.0/sh Our TP is pegged to 1.3x FY17F P/BV. The stock is currently trading at 7.6x FY17F PE, or almost 30% discount to its past 12 months’ average multiple, when IRPC’s earnings started to normalize. Key assumption FX (Bt/US$) Refinery: Utilization (%) Refine output (KBD) Petrochem: Utilization (%) Naphtha (US$/ton) HDPE spread (US$/ton) PP spread (US$/ton) ABS price (US$/ton) PS price (US$/ton) CAPEX (US$m) Source: Company, Krungsri Securities

Krungsri Securities Research

2015 34.0

2016F 35.0

2017F 36.0

2018F 36.0

92 198

92 198

92 198

99 213

88 491 874 668 1,464 1,257 72

88 400 800 800 1,400 1,300 150

88 450 850 850 1,400 1,300 150

88 500 850 850 1,400 1,300 150

6

October 6, 2016

Company Update | IRPC P/E Band

P/BV Band

Source: Bloomberg, Krungsri Securities

Source: Bloomberg, Krungsri Securities

Peer Comparison

BB Ticker

Name

IRPC TB PTTGC TB SCC TB TPC TB BCP TB ESSO TB IVL TB TOP TB 1301 TT 6505 TT 1402 TT 1326 TT 363 HK 338 HK 386 HK 051910 KS 009830 KS 011170 KS 010950 KS PCHEM MK DOW US RIL IN

IRPC PCL PTT GLOBAL CHEMICAL PCL SIAM CEMENT PUBLIC CO LTD THAI PLASTIC & CHEMICALS PCL BANGCHAK PETROLEUM PCL ESSO THAILAND PCL INDORAMA VENTURES PCL THAI OIL PCL FORMOSA PLASTICS CORP FORMOSA PETROCHEMICAL CORP FAR EASTERN NEW CENTURY CORP FORMOSA CHEMICALS & FIBRE SHANGHAI INDUSTRIAL HLDG LTD SINOPEC SHANGHAI PETROCHEM-H CHINA PETROLEUM & CHEMICAL-H LG CHEM LTD HANWHA CHEMICAL CORP LOTTE CHEMICAL CORP S-OIL CORPORATION PETRONAS CHEMICALS GROUP BHD CHEMICAL CO/THE DOW

RELIANCE INDUSTRIES LTD Average (simple) Source: Bloomberg, Krungsri Securities

Krungsri Securities Research

Market

PE

P/BV

Cap

(x)

(x)

US$

2,924 7,593 18,205 999 1,266 622 4,046 4,191 15,892 29,325 4,000 15,844 3,292 8,218 88,685 14,264 3,621 9,314 8,128 12,806 58,437 53,077

EPS Growth Div Yield ROE (%) 16F

(%)

Share Price

(%)

Performance

16F

17F

16F

17F

17F

16F

16F

8.8 11.3 12.7 N/A 8.8 7.5 14.1 9.3 15.5 17.1 17.8 14.9 9.5 8.1 16.9 11.5 5.8 6.8 7.1 19.7 14.7 12.4 11.9

7.6 9.6 12.5 N/A 8.0 8.8 14.7 9.9 14.9 18.7 14.9 15.1 9.2 9.3 13.0 10.5 6.2 7.1 7.7 18.0 12.8 11.1 11.4

1.2 1.1 2.6 N/A 1.1 1.2 1.6 1.4 1.7 3.3 0.6 1.7 0.7 1.8 1.0 1.2 0.8 1.1 1.4 2.0 2.3 1.3 1.5

1.1 22.0 17.0 1.0 15.6 17.6 2.3 9.7 1.6 N/A N/A N/A 1.0 20.3 11.1 1.1 69.4 (14.5) 1.5 73.2 (4.1) 1.3 29.1 (6.3) 1.7 4.6 3.6 3.2 13.6 (8.4) 0.6 (18.1) 19.3 1.6 20.7 (1.1) 0.6 (3.6) 3.3 1.6 38.9 (13.1) 1.0 11.6 29.8 1.1 33.6 9.5 0.7 264.6 (6.3) 1.0 51.7 (4.4) 1.2 110.1 (8.4) 1.9 (3.7) 9.5 2.0 (45.5) 14.8 1.2 (6.4) 11.6 1.4 33.9 3.9

4.5 4.5 3.4 N/A 4.9 0.0 2.5 4.9 4.6 4.3 4.4 4.5 3.7 3.9 3.1 1.9 0.8 0.9 2.9 2.6 3.5 1.1 3.2

14.2 3.7 9.9 (1.7) 21.6 (1.9) N/A 0.6 13.0 (2.3) 17.5 9.6 12.4 0.9 16.2 2.9 10.9 (0.3) 19.1 3.6 3.9 (2.3) 10.4 3.0 7.8 4.9 21.5 1.0 5.3 3.0 10.8 (10.1) 14.5 (2.4) 18.6 8.0 22.1 8.9 10.7 (0.6) 16.7 (4.3) 10.7 7.5 13.7

1M

3M

6M

YTD

2.0 0.4 15.8 1.7 4.9 18.5 11.9 17.3 14.8 31.4 35.9 37.1 (3.8) 8.5 (3.0) 0.8 23.8 25.0 2.6 27.7 37.3 20.7 5.9 8.3 (0.4) (1.3) 1.9 14.0 4.2 22.8 (2.9) (8.2) (8.7) 3.5 4.8 14.9 35.4 37.6 16.0 11.5 3.1 28.2 6.0 18.7 25.0 (8.2) (24.1) (26.9) 0.8 2.9 (9.9) 4.3 (6.5) 24.4 2.4 (15.1) 1.4 1.2 (1.2) (8.7) 6.4 2.2 0.7 9.7 6.1 7.4

7

October 6, 2016

Company Update | IRPC Quarterly P&L (Btm) Sales COGS (inc dep'n) Gross Profit SG&A Operating Profit Net other income/expense Net interest Pretax profit Income Tax Associates Minority interest Profit after tax (pre-ex) Extraordinaries, GW & FX Reported net profit Shares out (end Q, m) Adjusted shares (m) Pre-ex EPS EPS

Krungsri Securities Research

2Q15 59,216 (52,384) 6,831 (1,560) 5,271 866 (761) 5,376 (1,113) (22) (5) 4,236 0 4,236

3Q15 52,070 (49,339) 2,731 (1,361) 1,370 1,046 (1,268) 1,148 (210) (47) (4) 887 0 887

4Q15 49,024 (46,032) 2,992 (1,779) 1,212 (583) (117) 512 (31) (29) (4) 447 0 447

1Q16 42,575 (38,001) 4,574 (1,381) 3,193 (813) 141 2,520 537 (34) (9) 3,014 0 3,014

2Q16 45,057 (38,117) 6,940 (1,562) 5,377 (631) (209) 4,537 (847) 25 (9) 3,706 0 3,706

20,434 20434

20,434 20434

20,434 20434

20,434 20434

20,434 20434

0.21 0.21

0.04 0.04

0.02 0.02

0.15 0.15

0.18 0.18

8

October 6, 2016

Company Update | IRPC INCOME STATEMENT (Btm) Turnover Cost of sales (COGS) Depreciation & amortization Gross profit S&A expense Operating profit Other operating income EBIT Interest expense Interest income Other income Goodwill amortization Pre-tax profit Income tax on company & subsidiaries Profit after tax Minority interests Share of associate net income Preferred dividends Recurring attributable net profit Extraordinary items Reported net profit

2014 281,589 (282,720) (5,210) (6,341) (5,444) (11,785) 5,806 (5,979) (1,494) 0 0 0 (7,473) 2,398 (5,075) (21) (139) 0 (5,235) 0 (5,235)

2015 214,172 (192,457) (5,456) 16,258 (6,172) 10,086 4,348 14,434 (2,481) 0 0 0 11,953 (2,346) 9,607 (21) (184) 0 9,402 0 9,402

2016F 175,311 (149,641) (6,451) 19,218 (6,136) 13,082 2,150 15,232 (2,216) 0 0 0 13,016 (1,302) 11,715 (21) (184) 0 11,510 0 11,510

2017F 203,473 (172,846) (6,709) 23,918 (7,122) 16,796 2,150 18,946 (2,283) 0 0 0 16,663 (2,999) 13,664 (21) (184) 0 13,459 0 13,459

2018F 220,654 (188,600) (6,966) 25,088 (7,723) 17,365 2,150 19,515 (2,275) 0 0 0 17,241 (3,103) 14,137 (21) (184) 0 13,932 0 13,932

20,434 20,434 (0.26) 0.08 (31)

20,434 20,434 0.46 0.08 17

20,434 20,434 0.56 0.23 40

20,434 20,434 0.66 0.26 40

20,434 20,434 0.68 0.27 40

2014 (11,785) 5,806 (5,979) 5,210 (769) 1,950 7,295 (21,638) (13,163) (2,348) (15,511) 0 (139) 246 (2,367) 32 (17,738)

2015 10,086 4,348 14,434 5,456 19,890 (3,090) 10,124 (17,575) 9,349 (3,553) 5,796 0 (184) 2,976 2,500 98 11,187

2016F 13,082 2,150 15,232 6,451 21,684 (1,966) (1,650) 8,940 27,007 (2,769) 24,238 0 (184) 0 0 0 24,055

2017F 16,796 2,150 18,946 6,709 25,655 (3,684) 1,015 (4,955) 18,031 (2,043) 15,988 0 (184) (0) 0 0 15,804

2018F 17,365 2,150 19,515 6,966 26,481 (3,786) 656 (5,130) 18,221 (1,862) 16,359 0 (184) 0 0 0 16,175

(2,043) 0 (212) (2,256)

(1,635) (0) 296 (1,338)

(1,635) 124 (0) (1,510)

(4,604) 0 (0) (4,604)

(5,383) 0 0 (5,383)

Net change in cash Net cash/(debt) at YS Ending net cash/(debt)

(19,994) (40,169) (60,163)

9,849 (60,163) (50,314)

22,544 (50,314) (27,770)

11,200 (27,770) (16,570)

10,792 (16,570) (5,778)

Increase/(decrease) in cash & equivalents (Increase)/decrease in debt NOPLAT (net op profit less adjusted tax) Normalized OpFCF (est. maint. CAPEX) FCFE (free cash flow to equity)

(2,123) (17,871) (4,029) 5,530 133

559 9,290 11,343 23,779 1,897

8,309 14,235 13,266 14,680 9,819

6,200 5,000 15,262 19,464 10,804

10,792 0 15,730 19,694 16,175

Shares in issue (Y/E, m) Shares in issue (weighted avg. m) EPS (before extraordinary items, Bt) DPS (Bt) DPS/EPS (%) CASH FLOW (Btm) Operating profit Other operating income EBIT Depreciation & amortization EBITDA Notional cash taxes on ungeared operations Net change in working capital CAPEX Operating free cash flow (OpFCF) Net interest income adjusted for tax impact Net free cash flow (Net FCF) Non-operating income (net of tax) Equity income from associates Investments Net change in other assets/liabilities Other items Residual cash flow (RCF) Dividends Equity capital raised Other items Cash flow from financing

Krungsri Securities Research

9

October 6, 2016

Company Update | IRPC BALANCE SHEET (Btm) Cash & equivalents A/C receivable Inventory Others Total Current Assets Property and equipment Investments & associates Other assets Goodwill Total Assets

2014 3,038 11,192 25,344 4,567 44,142 100,872 11,434 5,020 1,331 162,798

2015 3,597 8,942 21,306 2,139 35,984 114,807 8,458 2,803 1,122 163,174

2016F 11,906 8,942 16,566 1,751 39,165 100,634 8,458 2,803 1,122 152,181

2017F 18,106 8,942 19,135 2,032 48,215 99,325 8,458 2,803 1,122 159,923

2018F 28,898 8,942 20,879 2,204 60,923 97,759 8,458 2,803 1,122 171,064

Short-term debt A/C payable Other current liabilities Total Current Liabilities Long-term debt Other liabilities Total Liabilities

16,703 25,815 4,311 46,829 46,498 1,567 94,894

4,676 25,741 5,793 36,210 49,235 1,850 87,296

4,676 20,015 4,742 29,432 35,000 1,850 66,283

4,676 23,118 5,504 33,298 30,000 1,850 65,148

4,676 25,225 5,968 35,869 30,000 1,850 67,720

Share capital Share premium Revaluation/Warrants/Treasury Translation adjustment Retained earnings Total ordinary equity Preferred equity Minorities Total equity & minorities

20,434 28,554 (455) 0 19,300 67,834 0 70 67,904

20,434 28,554 (140) 0 26,956 75,804 0 74 75,878

20,434 28,554 (16) 0 36,831 85,804 0 95 85,898

20,434 28,554 (16) 0 45,686 94,658 0 116 94,775

20,434 28,554 (16) 0 54,235 103,207 0 138 103,345

Accumulated depreciation BV per ordinary share (Y/E, Bt) Adjusted book value ps (Y/E, Bt)

58,776 3.32 3.32

58,776 3.71 3.71

65,227 4.20 4.20

71,936 4.63 4.63

78,902 5.05 5.05

2014

2015

2016F

2017F

2018F

(3.8) (109.3) (277.7) (733.5) (733.5) (733.5) (20.0)

(23.9) (2,686.3) (341.4) (279.6) (279.6) (279.6) 0.0

(18.1) 9.0 5.5 22.4 22.4 22.4 181.6

16.1 18.3 24.4 16.9 16.9 16.9 16.9

8.4 3.2 3.0 3.5 3.5 3.5 3.5

Accounting ratios Cash profit margin Gross profit margin Operating profit margin Net profit margin Turnover/avg. total assets (x) ROA ROE S&A/turnover Effective tax rate

(0.4) (2.3) (4.2) (1.9) 1.7 (3.2) (7.3) 1.9 32.1

10.1 7.6 4.7 4.4 1.3 5.8 13.1 2.9 19.6

14.6 11.0 7.5 6.6 1.1 7.3 14.2 3.5 10.0

15.1 11.8 8.3 6.6 1.3 8.6 14.9 3.5 18.0

14.5 11.4 7.9 6.3 1.3 8.4 14.1 3.5 18.0

Operating performance EBITDA margin EBIT margin NOPLAT margin (NOPLAT/Turnover) Asset turnover (Turnover/avg Op assets) ROCE (NOPLAT/avg Op assets) ROCE incl. capitalized goodwill

(0.3) (2.1) (1.4) 2.6 (3.7) (3.7)

9.3 6.7 5.3 1.8 9.8 9.7

12.4 8.7 7.6 1.6 12.0 11.9

12.6 9.3 7.5 2.0 14.8 14.7

12.0 8.8 7.1 2.2 15.6 15.5

RATIOS (%) Growth Turnover EBITDA EBIT Net profit EPS pre extraordinary items EPS (diluted) DPS

Krungsri Securities Research

10

October 6, 2016

Company Update | IRPC EQUITY VALUATIONS (Bt) EPS FDEPS FDEPS growth (%) DPS BVPS Adjusted BVPS Free cash flow to equity (FCFE) per share

2014 (0.26) (0.26) (733.52) 0.08 3.32 3.32 0.01

2015 0.46 0.46 (279.61) 0.08 3.71 3.71 0.09

2016F 0.56 0.56 22.42 0.23 4.20 4.20 0.48

2017F 0.66 0.66 16.93 0.26 4.63 4.63 0.53

2018F 0.68 0.68 3.52 0.27 5.05 5.05 0.79

(19.4) (19.4) 0.0 1.6 1.5 1.5 764.7

10.8 10.8 (0.0) 1.6 1.3 1.3 53.6

8.8 8.8 0.4 4.5 1.19 1.19 10.4

7.6 7.6 0.4 5.3 1.08 1.08 9.4

7.3 7.3 2.1 5.5 0.99 0.99 6.3

ENTERPRISE VALUATIONS (Btm) Ordinary shares (m) Share price (Bt) Ordinary equity MV MI & deferred taxes Equity MV (adjusted ord) Preferred equity Debt Enterprise value Net non-core assets Core enterprise value (EV)

2014 20,434 3 62,529 70 62,600 0 63,201 125,801 15,803 109,997

2015 20,434 3 62,529 74 62,603 0 53,911 116,514 13,177 103,337

2016F 20,434 3 62,529 95 62,624 0 39,676 102,300 21,485 80,814

2017F 20,434 3 62,529 116 62,646 0 34,676 97,321 27,685 69,636

2018F 20,434 3 62,529 138 62,667 0 34,676 97,343 38,477 58,865

Turnover EBITDA EBIT NOPLAT OpFCF OpFCF (normalized) Op (core) capital employed (CE) Avg. core capital employed

281,589 (769) (5,979) (4,029) (13,163) 5,530 115,302 108,900

214,172 19,890 14,434 11,343 9,349 23,779 116,612 115,957

175,311 21,684 15,232 13,266 27,007 14,680 104,089 110,350

203,473 25,655 18,946 15,262 18,031 19,464 101,765 102,927

220,654 26,481 19,515 15,730 18,221 19,694 99,543 100,654

0.4 (143.0) (18.4) (27.3) (8.4) 19.9 1.0 1.0

0.5 5.2 7.2 9.1 11.1 4.3 0.9 0.9

0.5 3.7 5.3 6.1 3.0 5.5 0.8 0.7

0.3 2.7 3.7 4.6 3.9 3.6 0.7 0.7

0.3 2.2 3.0 3.7 3.2 3.0 0.6 0.6

2014 2.3 0.9

2015 2.3 0.7

2016F 2.0 0.3

2017F 1.7 0.2

2018F 1.7 0.1

(4.0) (1.4) (4.7)

5.8 2.6 2.2

6.9 3.9 7.9

8.3 5.6 6.6

8.6 6.2 7.2

0.9 0.4 14.5 32.7 33.3

1.0 0.4 15.2 40.4 48.8

1.3 0.8 18.6 40.4 48.8

1.4 0.9 16.0 40.4 48.8

1.7 1.1 14.8 40.4 48.8

PE (x) PE (fully diluted, x) PE/FDEPS growth (x) Yield (%) P/BV (x) P/ABV (x) P/FCFE (x)

Core EV multiples EV/Turnover (x) EV/EBITDA (x) EV/EBIT (x) EV/NOPLAT (x) EV/OpFCF (x) EV/OpFCF normalized (x) EV/capital employed (YE, x) EV/avg capital employed (x) RISK MEASURES Equity multiplier (avg. total assets/avg. equity) Net debt/equity & MI Interest cover (x) Interest cover (EBIT & int. incl/int. expense) NOPLAT/interest paid Debt service (OpFCF/net interest paid) Short term ratios (x) Current assets/current liabilities Current assets less inventory/current liabilities A/C receivable, days Turnover Inventory, days COGS A/C payable, days COGS

Krungsri Securities Research

11

CG Rating 2015 Companies with CG Rating ADVANC

BAFS

BCP

BIGC

BTS

CK

CPN

DRT

DTAC

DTC

EASTW

EGCO

GRAMMY

HANA

HMPRO

INTUCH

IRPC

IVL

KBANK

KCE

KKP

KTB

LHBANK

LPN

MCOT

MINT

MONO

NKI

PHOL

PPS

PS

PSL

PTT

PTTEP

PTTGC

QTC

RATCH

ROBINS

SAMART

SAMTEL

SAT

SC

SCB

SCC

SE-ED

SIM

SNC

SPALI

THCOM

TISCO

TKT

TMB

TOP

VGI

WACOAL

AAV

ACAP

AGE

AHC

AKP

AMATA

ANAN

AOT

APCS

ARIP

ASIMAR

ASK

ASP

BAY

BBL

BDMS

BKI

BLA

BOL

BROOK

BWG

CENTEL

CFRESH

CHO

CIMBT

CM

BANPU CNT

COL

CPF

CPI

CSL

DCC

DELTA

DEMCO

ECF

EE

ERW

GBX

GC

GFPT

GLOBAL

GUNKUL

HOTPOT

HYDRO

ICC

ICHI

INET

IRC

KSL

KTC

LANNA

LH

LOXLEY

LRH

MACO

MBK

MC

MEGA

MFEC

NBC

NCH

NINE

NSI

NTV

OCC

OGC

OISHI

OTO

PAP

PDI

PE

PG

PJW

PM

PPP

PR

PRANDA

PREB

PT

PTG

Q-CON

QH

RS

S&J

SABINA

SAMCO

SCG

SEAFCO

SFP

SIAM

SINGER

SIS

SITHAI

SMK

SMPC

SMT

SNP TCAP

SPI

SSF

SSI

SSSC

SST

STA

STEC

SVI

SWC

SYMC

SYNTEC

TASCO

TBSP

TF

TGCI

THAI

THANA

THANI

THIP

THRE

THREL

TICON

TIP

TIPCO

TK

TKS

TMI

TMILL

TMT

TNDT

TNITY

TNL

TOG

TPC

TPCORP

TRC

TRU

TRUE

TSC

TSTE

TSTH

TTA

TTCL

TTW

TU

TVD

TVO

UAC

UT

UV

VNT

WAVE

WINNER

YUASA

ZMICO

2S

AEC

AEONTS

AF

AH

AIRA

AIT

AJ

AKR

AMANAH

AMARIN

AP

APCO

AQUA

AS

ASIA

AUCT

AYUD

BA

BEAUTY

BEC

BFIT

BH

BIG

BJC

BJCHI

BKD

BTNC

CBG

CGD

CHG

CHOW

CI

CITY

CKP

CNS

CPALL

CPL

CSC

CSP

CSS

CTW

DNA

EARTH

EASON

ECL

EFORL

ESSO

FE

FIRE

FOCUS

FORTH

FPI

FSMART

FSS

FVC

GCAP

GENCO

GL

GLAND

GLOW

GOLD

GYT

HTC

HTECH

IEC

IFEC

IFS

IHL

IRCP LALIN

ITD

JSP

JTS

JUBILE

KASET

KBS

KCAR

KGI

KKC

KTIS

KWC

KYE

L&E

LHK

LIT

LST

M

MAJOR

MAKRO

MATCH

MATI

MBKET

M-CHAI

MFC

MILL

MJD

MK

MODERN

MOONG

MPG

MSC

MTI

MTLS

NC

NOK

NUSA

NWR

NYT

OCEAN

PACE

PATO

PB

PCA

PCSGH

PDG

PF

PICO

PL

PLANB

PLAT

PPM

PRG

PRIN

PSTC

PTL

PYLON

QLT

RCI

RCL

RICHY

RML

RPC

S

SALEE

SAPPE

SAWAD

SCCC

SCN

SCP STANLY

SEAOIL

SIRI

SKR

SMG

SOLAR

SORKON

SPA

SPC

SPCG

SPPT

SPVI

SRICHA

SSC

STPI

SUC

SUSCO

SUTHA

SYNEX

TAE

TAKUNI

TCC

TCCC

TCJ

TEAM

TFD

TFI

TIC

TIW

TLUXE

TMC

TMD

TOPP

TPCH

TPIPL

TRT

TSE

TSR

TT

UMI

UP

UPF

UPOIC

UREKA

UWC

VIBHA

VIH

VPO

WHA

WIN

XO

Disclaimer The disclosure of the survey result of the Thai Institute of Directors Association ("IOD") regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an assessment of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and completeness of such survey result.

Anti-corruption Progress Indicator 2015 Level 5: Extended BCP

CPN

GYT

PE

PM

PPP

PT

PTT

AYUD DTC KCE PTTEP THREL

BAFS EASTW KGI SABINA TISCO

BANPU ECL KKP SCB TMB

BAY EGCO KTB SINGER TMD

BBL ERW LANNA SIS TNITY

PTTGC

SAT

SCC

THANI

TOP

BLA GCAP MBKET SNP TSTH

BTS HANA MFC SSF

CFRESH HTC MINT SSI

CIMBT IFEC MTI SSSC

Level 4: Certified ADVANC AMANAH CSL DCC IRPC IVL PPS PSL TCAP THCOM

ASP DRT KBANK PTG THRE

BKI FSS LHBANK SNC TOG

CNS INTUCH NKI SVI

Level 3B: Established by Commitment and Policy AAV CITY GL MANRIN PJW SAPPE SUTHA TOPP UV

AHC CK GOLD MATI PLANB SC T TPC VPO

AIT AKR CKP COLOR GPSC GRAMMY MODERN MSC PLE POLAR SCP SFP TAE TBSP TPCH TPIPL WAVE WINNER

ARROW CWT HYDRO NOBLE PRG SIM TCC TSR YUASA

ASK EARTH IRCP NOK PTL SLP TFD TT

BA EASON IT NPK Q-CON SMT TGCI TYCN

BDMS EPG JCT NUSA QTC SPA TGPRO UAC

BEC F&D KCM OISHI RCI SPORT THANA UBIS

BJCHI FANCY KWC OTO S11 SSC THIP UEC

CGH FIRE LH PAF SALEE SST TIW UMI

CHG FMT LIT PAP SAM STEC TK UP

CHOW FORTH LOXLEY PATO SAMART STPI TMW UPF

CIG GENCO MACO PF SAMTEL SUC TNDT UT

Level 3A: Established by declaration of intent ABC BWG DIMET ICC MAKRO PACE ROJNA SPI TMILL ZMICO

ACAP CEN DNA ICHI MC PCSGH RWI SRICHA TMT

AGE CENTEL DTAC INOX MCOT PDI SAMCO STANLY TNL

AH CHARAN EA INSURE MFEC PG SCCC SUPER TPCORP

ANAN CHO ECF IRC MJD PHOL SCG SYMC TSTE

AP CHOTI EE JAS MONO PLAT SEAOIL SYNEX TTCL

APCS CM EVER JTS MOONG PR SE-ED SYNTEC TU

APURE CNT FPI JUBILE NBC PRANDA SENA TASCO TVI

AS COL GBX KC NDR PREB SITHAI TCMC UOBKH

ASIA CPF GC KTC NINE PS SMK TFI UREKA

ASIAN CPI GFPT KYE NMG QLT SMPC THAI VGI

ASIMAR CPL GLOW LHK NSI RATCH SPALI TICON VNT

AF BRR FVC KCAR MPG QH SR TRUE WIN

AIRA BSBM GEL KKC MTLS ROCK SUSCO TSC XO

AKP BTNC GLOBAL KSL NCH ROH TAKUNI TSI

ALUCON CCP GUNKUL KTECH NCL RP TEAM TTW

AMARIN CI IEC L&E NNCL RPC TF TVD

AMATA CSC IFS LALIN NPP S&J TIC TVO

AOT CSR ILINK LTX OCC SGP TIP TVT

APCO CSS INET M OCEAN SIAM TIPCO U

BEAUTY EFORL J MALEE PB SKR TMC UKEM

BFIT EPCO JMT MBAX PCA SMG TMI UNIQ

AJ CPH GRAND MAX PRAKIT SIRI TCJ TTTM

AMC CSP GREEN M-CHAI PRECHA SMART TCOAT TWP

AQUA CTW HFT MDX PRIN SMM TH TWZ

ARIP DCON HTECH MIDA RAM SOLAR TKS UMS

AUCT DRACO IHL ML RICH SPG TNH UPA

BAT-3K DSGT ITD MPIC RS SPVI TNPC UPOIC

BIG DTCI JSP NC SANKO STA TPAC UTP

BJC E KDH NEP SAUCE STAR TPOLY UVAN

BOL EMC KTIS NWR SAWAD SVH TRC VARO

BIGC DELTA HMPRO LPN NTV RML SPC TKT WACOAL

BROOK DEMCO HOTPOT LRH OGC ROBINS SPCG TLUXE WHA

Level 2: Declared 2S BLAND FER KASET MILL PSTC SPACK TRT VNG

ABICO BROCK FNS KBS MK PYLON SPPT TRU WIIK

BH BKD ESTAR FE JUTHA K MBK MEGA PDG PRINC SMIT SORKON TPA TPP UWC VIBHA

Level 1: Committed AEONTS CGD GIFT MAJOR PL SF TC TTI WG

AFC CMR GLAND MATCH PPM SHANG TCCC TTL

CBG ESSO KTP OHTL SAWANG SVOA TRUBB VI

CCET FOCUS LEE PICO SCN SWC TSE VIH

CCN FSMART LST PK SEAFCO TAPAC TTA VTE

Disclaimer The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company . The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and completeness of the assessment result." Reference Level 5: Extended – Extension of the anti-corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Level 4: Certified – Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 3: Established – Carrying out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 3A: Established by declaration of intent, Level 3B: Established by Commitment and Policy Level 2: Declared – Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 1: Committed – Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws

Krungsri Securities Public Company Limited Headquarters 898 Ploenchit Tower, 3rd Floor, Ploenchit Road, Lumpini Pathumwan, Bangkok 10330 Tel: 0-2659-7000 Fax: 0-2658-5699 Internet Trading: 0-2659-7777 Branches Emporium 662 Emporium Tower, Fl. 10, Sukhumvit 24 Road Klongton, Klongtoey, Bangkok 10110 Tel: 0-2695-4500 Fax: 0-2695-4599

Nakhon Pathom 67/1 Ratchadamnoen Road, Tambol Phra Pathom Jaedee, Amphur Muang, Nakhon Pathom 73000 Tel: 0-3427-5500-7 Fax: 0-3421-8989

Central Bangna 589/151 Central City Tower 1 Office, Fl. 27 Bangna-Trad Road, Bangna, Bangkok 10260 Tel: 0-2763-2000 Fax: 0-2399-1448

Suphanburi 249/171-172 Moo 5 Tambol Ta Rahad, Amphur Muang, Suphanburi, 72000 Tel: 0-3550-1234 Fax: 0-3552-2449

Rama II 111/917-919 Rama II Road, Smaedum, Bangkhuntien, Bangkok 10150 Tel: 0-2895-9575 Fax: 0-2895-9557

Nakhon Ratchasima 168 Chomphon Road, Tambol Nai Muang, Amphur Muang Nakhon Ratchasima, Nakhon Ratchasima 30000 Tel: 0-4425-1211-4 Fax: 0-4425-1215

Vibhavadi-rangsit Bank of Ayudhya Public Company Limited 123 Suntowers (B) Building, Vibhavadirangsit Road, Jompol, Jatujak, Bangkok 10900 Tel: 0-2273-8388 Fax: 0-2273-8399

Khon Kaen 114 Sri Chan Road, Tambol Nai Muang, Amphur Muang, Khon Kaen 40000 Tel: 0-4322-6120 Fax: 0-4322-6180

Chonburi 64/17 Sukhumvit Road, Tambol Bang Plasoi, Amphur Muang, Chonburi 20000 Tel: 0-3879-0430 Fax: 0-3879-0425

Chiang Mai 70 Chang Phuak Road, Tambol Sri Phum Amphur Muang, Chiang Mai 50200 Tel: 0-5321-9234 Fax: 0-5321-9247

Hat Yai Branch 90-92-94 Nipat U Tit Nueng Road,Tambol Hat Yai, Amphur Hat Yai, Songkhla 90110 Tel: 0-7422-1229 Fax: 0-7422-1411

Chiang Rai 231-232 Thamalai Road, Tambol Wiang, Amphur Muang, Chiang Rai 57000 Tel: 0-5371-6489 Fax: 0-5371-6490 Phitsanulok 275/1 Phichaisongkram Road, Tambol Nai Muang, Amphur Muang, Phitsanulok 65000 Tel: 0-5530-3360 Fax: 0-5530-2580 Central line:

Analyst Team

Sector Coverage

662-659-7000

E-mail

Naphat Chantaraserekul, Head of Research Kittisorn Pruitipat, CFA, FRM

Energy, Petrochemical, Strategy

ext. 5000

[email protected]

Construction Property, ICT,Materials Contractor

ext. 5019

[email protected]

Jesada Techahusdin, CFA

Banking, Consumer Finance, Insurance ext. 5004

[email protected]

Sunthorn Thongthip

Insurance Insurance Strategy Food, Transportation,

ext. 5009

[email protected]

Worrapong Tuntiwutthipong

Electronic, Automotive, Commerce

ext. 5016

[email protected]

Karun Intrachai

Media Renewable Energy

ext. 5010

[email protected]

Teerapol Udomvej

Healthcare, Tourism

ext. 5012

[email protected]

Artit Jansawang

Mid - Small cap, MAI

ext. 5005

[email protected]

Nalinee Praman, Assistant Analyst

Mid - Small cap, MAI

Apisak Limthumrongkul

Technical

ext. 5007

[email protected]

Kitti Pitakteerabandit, Assistant Analyst

Fax 662-658-5643

Definition of Ratings OUTPERFORM NEUTRAL UNDERPERFORM

- Stocks with an expected capital gain above 10% in the next 12 months for small-caps, above 5% for big-caps - Stocks with an expected capital gain between -10% and +10% in the next 12 months for small-caps, -5% to +5% for big-caps - Stocks with an expected capital gain below 10% in the next 12 months for small-caps, below 5% for big-caps

www.krungsrisecurities.com