Morgan Stanley has upgraded PTT Exploration & Production PCL. from Underweight to Overweight and increased its price target to THB156.00, up from THB76.00.
The research house points to a resumption of production growth after nearly two years of flat volumes. Morgan Stanley expects PTTEP to expand production at a 6% compound annual growth rate (CAGR) over 2025-28 and to grow by 2-3% thereafter. That growth pace is described as roughly double that of global peers and, when paired with the current forward Brent oil curve, supports an implied free cash flow yield of about 20%.
Market data cited in the analyst note shows a current free cash flow yield of 6% for the company, with gross profit margins reported at 78.01%. Morgan Stanley also highlighted that new production tied to prolific basins in Malaysia, the UAE and Algeria should deliver higher return on equity (ROE) versus PTTEP’s more mature Thailand offshore portfolio. Potential license extensions for S1 and MTJDA in Thailand were identified as possible ROE-accretive outcomes if they materialize. The company’s current ROE is shown at 12%.
On reserves, the bank expects a return to organic reserve expansion after a two-year pause, with particular momentum in Thailand, Malaysia and the Middle East. Morgan Stanley projects a 13% CAGR in 1P reserves to reach 1.8 billion barrels of oil equivalent. It also anticipates roughly 10% CAGR in 1P+2P reserves in 2025.
Balance sheet and shareholder returns factors feature prominently in the upgrade. PTTEP is described as operating with a net cash balance sheet, which Morgan Stanley views as supportive of higher dividends and the potential for a dividend yield roughly 1.5 times that of peers. Historical payout consistency is noted: PTTEP has maintained dividend payments for 27 consecutive years, with a current dividend yield reported at 7.81%. Financial leverage is moderate, with a debt-to-equity ratio of 0.25. The reserve mix remains skewed toward natural gas, which accounts for about 70% of PTTEP’s reserves.
Context for investors - The upgrade centers on materially improved production and reserve trajectories, a strong gross margin profile and a balance sheet that enables attractive shareholder distributions. These elements together underpin Morgan Stanley’s substantially higher valuation target.