IRPC Predicts a Stellar Result in 2021 with Plan to Break into Specialty Products

IRPC said petrochemical product sales in 2Q21 are expected to remain high from last quarter in response to global demand recovery. Keep an eye out for new supplies coming into the market in the second half of this year. By the year 2024, IRPC aims to double the proportion of specialty products. Analysts have given a new target price of ฿4.70 per share. 

 

Mr. Chawalit Tippawanich, President and Chief Executive Officer of IRPC Public Company Limited (IRPC), stated that the company anticipated an improved petrochemical spread in the second quarter of 2021 due to global economic recovery as a result of a broader vaccine roll-out. Stock gains, on the other hand, are expected to stay steady in comparison to the first quarter of this year, owing to nearly stable oil prices.

For the second half of this year’s forecast, the new overseas petrochemical plant will maximize production capacity to the market. Petrochemical products continue to be in high demand. As a result, IRPC is upbeat that the company’s performance will continue to rise for the rest of the year.

Petrochemical market situation in 2Q21 overall looks positive. Crude oil demand is likely to remain increasing from the end of 1Q21 as OPEC+ continues to balance the market by gradually increasing production in accordance to rising demand. Therefore, IRPC has attempted to promote renewable energy while still pushing goods that meet the needs of consumers in the new normal society.

During the Covid-19 outbreak, the company saw market opportunities. Covid-19 will not go anywhere, despite the fact that vaccines are already available and the epidemic situation is improving. This is a chance for the IRPC to break into specialty products markets like medical equipment, hygiene products, the automobile industry, electrical appliances, packaging, and so on. By 2024, IRPC hoped to increase gains from specialty goods to 30%.

 

Maybank Kim Eng (Maybank) maintained a “BUY” rating on IRPC and raised a target price to ฿4.7 per share (1.25x FY21E P/B). Maybank raised FY21E EPS by 73%, adjusting chemical spreads higher and tweaking middle distillate lower. Every USD1/bbl increase in GIM adds c. 2 billion baht to the bottom line. IRPC will continue to benefit from cyclical tailwinds. Chemical sector outlook remains positive but note earnings growth momentum will slow going forward as chemical (55-60% EBITDA) spreads will ease.

Maybank remained constructive on the chemical outlook as demand continues to be robust with improving consumption trends in China. Spreads should ease in 2H21 as new PP capacity comes online in China (2mta) and Malaysia’s 900kta Rapid (PP), however there remains risk that spread strength may surprise on the upside. Maybank raised its FY21 PP  and ABS spread assumptions by 16% and 23% to 700/t and 1600/t. Recall every USD100/t increase in PP and ABS spreads for the year adds USD1/bbl and USD0.3/bbl to IRPC’s GIM.

With chemical spreads expected to ease, the refining segment will drive earnings growth in 2H21 on improving fuel demand. Recovery, however, will remain uneven 1)  bloated  middle  distillate inventory 2) resurgence risk of Covid19 wave (India is biggest diesel consumer).

 

The share price of IRPC rose ฿0.16/share or 4.06% to ฿4.10/share in the morning session on May 21, 2021, with a trading value of 1,107 million baht.