Total profits earned by Thai listed companies, excluding the energy sector, will likely shrink by 8.3% this year as soaring oil prices raise production costs in many industries, according to Kasikorn Securities (KS).
The brokerage expects the average global oil price to stand at US$95 a barrel in 2022, and estimates international tourist arrivals will drop by half to 1.5 million this year, from a previous estimate of 3 million, because of a fifth wave of the pandemic caused by the Omicron strain.
The tourism sector's muted recovery will slow Thai GDP growth to just 2-2.5%, down from the previous forecast of 3.7%, the brokerage said.
However, oil refinery stocks will gain from rising crude prices. KS expects the energy sector to record 33% profit growth this year, increasing listed companies' total profits by 1.4%.
For listed energy companies, KS recommends Esso (Thailand) or ESSO, Thai Oil (TOP), Star Petroleum Refining (SPRC), IRPC, PTT Exploration and Production (PTTEP), Bangchak Corporation (BCP) and PTT, whose earnings are expected to increase by 165%, 137%, 133%, 81%, 66%, 48% and 17%, respectively.
However, the growth is disproportionate among all sectors. Excluding the energy sector, total profits of listed companies will drop by 8.3% as they grapple with higher production costs, said the brokerage.
According to Kasikorn Research Center (K-Research), the protracted Russia-Ukraine war and sanctions on Russia will cause global raw material prices to rise and negatively affect the Thai industrial production sector, especially food, cars, construction materials and packaging manufacturers.
The war will also drive up dry bulk shipping rates because of rising demand to replenish commodities, said K-Research.
The cost burden may be transferred to some consumers depending on a number of factors, such as remaining stocks, the ability to find alternative raw materials, competitive conditions in the market and consumer purchasing power, said the research house.
Global feedstock prices, including energy (crude oil and natural gas), agricultural commodities (wheat, maize, chemical fertilisers and oil crops) and industrial metals (iron, nickel and aluminium), are likely to remain high during most of 2022 thanks to the war, according to K-Research.
Raw material prices may fall in the second half of the year if Russia and Ukraine can reach a peace agreement, but are expected to remain high when compared with 2020-2021, said the research house.
Prices of energy products, such as gasohol 95, could rise by around 35-40% from last year, according to K-Research. Prices of feedstock and human food such as maize, wheat flour and bottled palm oil may increase by 24-46%, while steel prices may rise by 5-10% on average.