IVL Slumps 6.5% from Weak 4Q18 Forecast, Maybank Recommends “BUY” at ฿67.00

Indorama Ventures Public Company Limited (IVL) dropped as much as 6.4% from the opening price at ฿53.50/share to its lowest of the morning session at ฿49.00/share with ฿2.12 billion in value.

Maybank Kim Eng’s analysts expect a weak 4Q18 results from IVL which would be a pressure on the sector in short term. Thus, Maybank recommends accumulating on weakness for the better earnings in 1H19, suggesting BUY with the new 12-month target price at ฿67.00/share based on the average PBV +1SD at 2.15x (from ฿72.00/share, PBV 2.3x) in line with the downstream oil industry which traded with declining valuation previously.

From an analytic view, Maybank expects IVL’s 4Q18 net profit to be ฿2.3 billion, decreased by 77.2% from the same period of last year, and decreased 77.3% from the previous quarter. The weak earnings were pressured by stock losses (฿2 billion by estimation, downed from ฿2.2 billion of gain in 3Q18) and weak core profit due to lower sales volume and margins.

Excluding the stock results and extra items, Maybank expects the core earnings of ฿3.9 billion, decreased by 51.9% QoQ but increased 18.5% YoY. The normalized earnings drop QoQ, pressured by a sharp drop in PTA and PET spreads in Asia including the lower PET spreads in the West as well.

Core EBITDA/ton is forecast at USD111/ton, a drop of 26.1% QoQ, while sales volume is expected to decline 1.5% QoQ to 2.7 million tons due to seasonal factors. When combining the results of stock losses, the EBITDA / ton is expected to be $89/ton, down 49.2% QoQ.