KKPS Reiterates ‘Buy’ on Thai Utilities Ahead of 2026 Recovery
Kiatnakin Phatra Securities (KKPS) has definitively reiterated its constructive and positive investment stance on Thailand’s vital utilities sector, maintaining a strong ‘Buy’ rating on major players GULF and BGRIM as the respected brokerage firm projects that lingering macroeconomic headwinds will ease significantly throughout 2026. This anticipated shift in the global Economy is expected to usher in markedly improved power generation margins for utility companies and unlock substantial potential growth opportunities across the sector.
KKPS specifically projects that the combined net profit after tax (NPAT) for the three leading utility companies—BGRIM, GPSC, and GULF—is set to reach a robust THB 38 billion in 2026, which represents a strong 19% year-on-year increase from 2025. This robust growth projection places GULF at the forefront of the sector’s expansion, with its NPAT anticipated to soar by a leading 22% to THB 28 billion. In comparison, GPSC is expected to post a solid gain of 11%, and BGRIM is forecasted to see a 7% increase. Furthermore, the analysis of the growth trajectory over the three-year period from 2025 to 2027 shows GULF maintaining its lead by delivering the highest projected compound annual growth rate (CAGR) at an impressive 18%.
This optimistic outlook is heavily underpinned by the current sector valuations, which KKPS notes are trading near their historical lows, with current price-to-earnings and price-to-book ratios sitting at minus one standard deviation from the historical average since 2012. This depressed valuation is partially attributed to the elevated US 10-year Treasury yield (US10YY), a global Finance factor expected to normalize by 2026, which should trigger a valuation rebound and a new phase of Investment in the Thai power sector.
Lower Costs and Policy Catalysts Signal Margin Uplift
The core thesis supporting the KKPS upgrade and positive Investment outlook is the confluence of stabilizing global finance conditions and a projected sharp decline in operational costs for power generators. KKPS highlights that the expected easing of US interest rates throughout 2026 will be the primary catalyst for a sector-wide valuation rebound, as the historically inverse relationship between US bond yields and utility stock valuations is likely to revert to the mean.
Crucially, the operational margins of utility companies are expected to significantly improve due to falling feedstock costs. KKPS analysts specifically project an approximate 8% year-on-year decline in pool gas prices, which is the primary fuel source for a significant portion of Thailand’s power generation, alongside softer global prices for liquefied natural gas (LNG) and oil. Lower fuel costs directly translate into higher profitability for power producers like GULF and BGRIM, assuming steady power purchase agreement (PPA) terms.
Beyond cost factors, KKPS sees the impending release of a new national Power Development Plan (PDP) as a major potential policy catalyst for the sector. This new PDP is anticipated to explicitly reflect the higher future electricity demand projections stemming from Thailand’s rapidly growing data center sector and the government’s robust push for electric vehicle (EV) adoption. Even under the most conservative demand scenarios modeled by the firm, Thailand may require an additional 2.5GW in new generating capacity, a need that could potentially revive demand for conventional power plants while simultaneously driving new Investment into ongoing community solar initiatives, ensuring robust future Business for the utility giants.
Navigating Short-Term Political Headwinds for Long-Term Growth
While the long-term Investment picture painted by KKPS remains robust, the brokerage firm acknowledges a potential near-term headwind associated with the upcoming 2026 general election in Thailand. Historically, periods leading up to elections often see political parties introduce populist measures aimed at curbing the cost of living for citizens, which frequently includes targeting and potentially temporarily adjusting utility tariffs or electricity prices. Such political interventions, while introducing short-term regulatory risk and impacting immediate Finance results, are viewed by KKPS as inherently temporary and structural to the Thai political cycle, not reflective of long-term sector fundamentals.
The firm’s analysis of historical patterns provides assurance, indicating that the sector typically recovers its profitability and market valuation shortly following the conclusion of past elections, as economic realities and long-term regulatory agreements reassert themselves. The overriding strategic focus for Investment remains on the underlying structural demand for power, which is being driven relentlessly by industrialization and digitization across the Thai Economy.
The predicted combination of lower global interest rates, reduced fuel costs, and the confirmed need for new capacity under the updated PDP creates a powerful three-part Business case that dwarfs the short-lived political risks. Therefore, the KKPS advice implies that any temporary dips in stock prices caused by electoral noise should be viewed by investors as a strategic accumulation opportunity to bolster their exposure to high-quality utility assets like GULF and BGRIM, positioning for the sustained recovery and growth expected in 2026 and beyond.
Financial Analyst Commentary: De-Risking Utilities via Global Rate Cycle
The KKPS assessment accurately identifies the core mechanism driving the current undervaluation of Thai utilities: the global Finance cycle, specifically the high US10YY. Utilities, characterized by stable, long-term contracted cash flows (PPA revenue), are often valued as bond proxies; thus, when US Treasury yields are elevated, their relative attractiveness declines, leading to valuation compression.
The forecast for a 2026 US rate cut cycle acts as a powerful de-risking event for the sector, expected to trigger a significant re-rating of the price-to-earnings and price-to-book multiples back towards their historical averages. This is further magnified by the improving operating leverage: the concurrent decline in pool gas and LNG costs (which are often price-pass-through but subject to time lags) means that the companies’ earnings should experience a non-linear uplift.
The potential 2.5GW capacity requirement highlighted in anticipation of the new PDP is a critical Business catalyst, signaling new Investment opportunities and maintaining high barrier-to-entry for new competitors. While political risk (tariff intervention) is a valid short-term concern, its historical transience, as noted by KKPS, means long-term Investment strategies should prioritize the structural tailwinds of energy demand growth in the Thai Economy over temporary electoral noise, confirming the strong ‘Buy’ stance for 2026.
Regional Market Impact: Energy Investment Diversification and ASEAN Connectivity
The strong KKPS forecast for GULF and BGRIM underscores a critical regional Investment theme: the increasing diversification of Thai utility assets beyond domestic borders and the shift in Finance focus from coal/fossil fuels to gas/renewables across ASEAN. GULF’s projected 18% CAGR is largely predicated on its robust pipeline of projects in Vietnam and Oman, demonstrating that future Business growth for Thai giants is increasingly reliant on successful execution in neighboring, high-growth ASEAN economies, compensating for slower domestic power demand growth outside of the data center sector.
This trend effectively de-correlates the earnings growth of key Thai utilities from purely domestic Economy performance, making them more attractive to regional Investment funds seeking geographically diversified exposure to ASEAN energy demand. Furthermore, the anticipated release of the new PDP, which is expected to align with Thailand’s net-zero commitments and incorporate higher renewable targets, will spur a significant wave of green Finance and Investment within the Thai Economy.
This alignment with global ESG trends will make the Thai utility sector more competitive for attracting long-term, low-cost capital from international institutional investors, distinguishing it from peers in the region that remain heavily reliant on high-carbon energy sources and potentially positioning Thailand as a regional leader in financing the energy transition.
