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:
- 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).
- 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.
- 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:
- 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.
- Aromatic business will likely remain in an uptrend due to tightening supply.
- Refinery business should grow marginally, helped by higher demand for heating oil during winter.