CGSI, or CGS International Securities (Thailand), has revised up its earnings per share, or EPS, forecasts for Star Petroleum Refining, or SPRC, for 2026-2028 by 3.1%, 37.1% and 7.4% respectively, after raising its gross refining margin, or GRM, assumptions to 13.5, 9.5 and 9.2 US dollars per barrel. This lifts SPRC's target price to 16.5 baht, equal to an EV/EBITDA of 7 times in 2026, compared with the Asian average of 6-8 times. CGSI maintains its buy recommendation because it expects SPRC to keep a strong GRM in 2027, driven by tight diesel supply in Asia, and sees any share price weakness from concerns over a potentially softer fourth-quarter 2026 net profit due to higher costs as a good buying opportunity. CGSI estimates that SPRC's GRM will fall from 23.7 US dollars per barrel in the second quarter of 2026 to 14.5 US dollars per barrel during July-August 2026, but that is still a healthy level compared with 12.8 US dollars per barrel in the first quarter of 2026 and 6.0 US dollars per barrel in 2025. The main issue that Thai refineries, including SPRC, still need to worry about in the fourth quarter of 2026 is soaring freight costs amid rising geopolitical tensions in the Middle East, following the attack on Saudi Arabia's East-West oil pipeline, which pushed very large crude carrier, or VLCC, rates from the Middle East to Singapore up to around 28 US dollars per barrel last week, compared with 12 US dollars per barrel in August 2026 and only 4.9 US dollars per barrel in the pre-war period of January-February 2026. SPRC is exposed to marine freight costs in the spot market, so CGSI expects persistently high freight rates to start pressuring net profit from mid-October 2026 onward. Another cost that is likely to weigh on earnings is the crude premium for Middle Eastern crude, reflected in ICE Abu Dhabi Murban Futures at around 24 US dollars per barrel month-to-date, amid tighter crude supply. However, Asian diesel crack spreads are expected to rise further in the fourth quarter of 2026, which should help refineries absorb higher feedstock costs.
Star Petroleum Refining Co LtdCGSI raised SPRC's 2026-2028 EPS forecasts and target price to 16.5 baht while maintaining a buy rating.
