IVL Soars 8% to ฿27.50 as Analyst Expects the PET Business to Catalyze the 2020 Outlook

The share price of Indorama Ventures Public Company Limited (IVL) rose ฿2.00/share or 7.84% to close the morning session at ฿27.50/share. The highest share price was ฿28.00/share and the lowest was ฿25.00/share with a trading value of 1,065 million baht. The price jumped to a new high in one month after reaching 28.00/share on March 4, 2020.

 

BNP Paribas stated in its analysis that IVL management indicated a net positive benefit to its net profit in 1Q20, and is likely to continue to 2Q20 mainly due to the improving PET and PTA margins as demand rose while the cost of feedstock lowered. Meanwhile, the company benefited from higher utilization rates of PET and fibers as well.

BNP Paribas estimated that the PET group will combine a contribution to IVL’s EBITDA around USD 300-400 million in 1H20, increased from USD 200 million in 2H19.

However, IVL’s management confirmed that the margins of its three shale gas-based products, which includes MTBE, EG, and ethylene, for a total of 11% of IVL’s capacity would collapse in 1Q20 following the sharp drop in oil-driven product prices mainly due to lower demand and the lockdown in the US.

IVL had revised down its 2020 capex from USD 938 million to USD 633 million mainly due to the delayed capex from its new PET-PTA plant in the US, recycling PET capacity expansion, and a cut to maintenance capex. Nevertheless, BNP Paribas saw that the cut was reasonable and expected that the generated EBITDA of USD 1.2-1.4 billion in 2020 would suffice for capex, debt repayment and interest expense.

Thus, BNP Paribas maintained its “BUY” signal for IVL with a target price at ฿40.00/share.