Analysts Expects Improving Petchem Spreads to Benefit SCC, Recomm. “BUY” at a TP of Bt472

Analysts have a positive outlook on Siam Cement Public Company Limited (SCC), seeing an improvement of petrochemical spreads as the main driver for the increase in 4Q20 earnings, while expecting the company to enter a growth phase in the next 3-5 years from all of its three businesses.

 

Maybank Kim Eng has given a “BUY” recommendation on SCC with a target price at ฿430.00/share.

Despite a 45-day maintenance shutdown of MOC petrochemical plant, Maybank expected a decent core profit of THB9b (-8% QoQ, +27% YoY) for SCCs 4Q20 results. This is mainly driven by higher petrochemical spreads. Outlook for the next 3-5 years, SCC will enter a growth phase, driven by all three businesses.

The petrochemical business will see production capacity increase by 70%, focusing on HVA and innovation. The cement and building material products business, focusing on services and solutions to retail, and the comprehensive packaging business, aiming to grow to double in the next 5 years.

Maybank expected 2H20 dividend of THB9.5, totaling THB15 for full year, implying a yield of 3.7%.  Maintain BUY, with a TP of THB430 on a forward P / E + 0.5SD = 13.9x.

 

KGI Securities has upgraded SCC’s rating from “Neutral” to “Outperform” with a target price at ฿472.00/share, expecting the company to report 4Q20 earnings of Bt7.8bn, an increase of 11% YoY.

KGI expected SCC to report 4Q20 earnings of Bt7.8bn (+11.1% YoY, -19.0% QoQ). The increase YoY would be due to improving petrochemical spreads as a result of container shortage. The drop QoQ would be due to i) MOC planned shutdown, and ii) recognizing lower profit contribution from SCGP.

The security company upgraded its 2020 earnings forecast by 7.2% mainly due to a higher than expected dividend income from Siam Kubota. KGI upgraded 2021 earnings forecast by 5.1% from equity income in petrochemical business (TPIA) thanks to a higher utilization rate and higher premium of polyolefin prices which result in 11.1% earnings growth in 2021.

KGI upgraded SCC to Outperform, from Neutral, with a 2022 SOTP based target price of Bt472, from Bt366, due to the improving outlook for petrochemical business (both Thailand and Indonesia) and strong growth outlook for packaging business.