Banpu Public Company Limited (BANPU) Upgraded to Buy with a Target Price of 8 Baht

Thanachart Securities Company Limited has modified its recommendations for Banpu Public Company Limited (BANPU), upgrading it from Sell to Buy with a target price of 8 baht. This decision is based on three positive factors that are expected to drive the company’s profit growth in 2024-2026.

Three Key Factors Driving Profit Growth

1. Coal Prices: Coal prices are expected to return to a level of $130-140 per ton, higher than the previous forecast of $120-125 per ton. Additionally, BANPU’s production volume is also expected to increase.

2. US Gas Prices: US gas prices are expected to increase from Quarter 4/2024 onwards, which will positively impact BANPU’s profit.

3. Carbon Capture and Storage (CCUS) Project: BANPU aims to push the CCUS project to achieve higher profits. The company is the first player to start developing the CCUS project in Barnet, Texas, USA, and has already generated a profit of 96 million baht in the first half of 2024.

CCUS Project to Drive Higher Profits

BANPU plans to increase the production of the CCUS project to reach 17 million tonnes by 2029. The company will benefit from a US government subsidy from the Inflation Reduction Act, which will provide a 12-year subsidy of $85 per tonne for carbon dioxide production. As a result, the company has a margin for CCUS projects that is as high as 45%.

Adjusted Coal Price Forecast and Sales

Due to the current increase in coal prices, the analysis department has adjusted the coal price forecast for 2025-2026 to $135 and $130 per ton. Additionally, BANPU’s sales in 2024-2026 are expected to increase by 3-5% with strong profit forecasts.

Valuation

Based on the strong profit forecasts, the analyst department sees BANPU’s price as expensive, trading on a 2024-2025 PE of 11.7 / 10.7 times.