PTTGC’s High Profit in 3Q18 Leads to “BUY” recommendation, Giving TP at ฿106

Phillip Securities (Thailand) has made an analysis on PTT Global Chemical Public Company Limited (PTTGC) and recommend investors to “BUY”, giving FY18 target price of ฿106/share.

The growth of 18% QoQ and 29% YoY in 3QFY18 was boosted by aromatic business. Stripping out a ฿0.8bln gain from extra items (i.e. stock gain, foreign exchange gain, loss from derivatives, and  divestment gain from API), core profit rose QoQ as:

1. The aromatic business performed better on the back of a 47% surge in PX, an aromatic feedstock used in the production of PTA, spreads which sequentially raised P2F to US$247/ton (from US$130/ton in 2QFY18).
2. Olefins business weakened, tracking a 2% drop in High-density polyethylene (HDPE) prices as a result of the lingering US-China trade war and a decrease in utilization rate from 104% to 97%  following the maintenance shutdown of plant Olefins 1.
3. Refinery business was stronger thanks to an increase in Market GRM (gross refining margin) from US$6.2/barrel to US$6.4/barrel as well as spreads of fuel oil.

 

4QFY18 profit seen to stay flat QoQ: Phillip Securities forecasts PTTGC’s 4QFY18 profit will hold flat QoQ based on assumptions that:

1. Olefins business will be steady as a likely continued weakness in HDPE spreads due to worries over global petrochemicals capacity additions along with the impact of the ongoing trade war should be offset by a potential return to normal utilization rate.
2. Aromatic business will likely remain in an uptrend due to tightening supply.
3. Refinery business should grow marginally, helped by higher demand for heating oil during winter.