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Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

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Equity Bottom-Up

Analyst meeting yesterday came out with a positive outlook for various petrochemical chain. Core polymer business has strongly recovered and tends to grow further in 4Q20. Meanwhile, aromatics and refinery to slowly improve in 4Q20-1H21.<ul>
<li>We expect PTTGC’s core earnings to strongly recover in 4Q20, led by margin expansion across all value chains. HDPE spread in 4QTD has already improved by 11%QoQ, while aromatics margin to be supported by economic recovery.</li>
<li>We revise 2020E earnings down to a loss to reflect a weakness in 9M20. However, we maintain a positive view on 2021 performance, led by new capacity.</li>
<li>Adjusted EBITDA was Bt7.4bn (-16%YoY, -3%QoQ). A weak drop was due to weak performance YoY and QoQ in refinery and aromatics BU. However, polymer EBITDA showed a strong recovery QoQ from increasing HDPE spread.</li>
</ul><div></div>We reiterate our ‘BUY’ rating with the target price at Bt56.5, derived from 0.9xPBV’21E which is equal to -1SD to its 5 year average trading.

Analyst meeting yesterday came out with a positive outlook for various petrochemical chain. Core polymer business has strongly recovered and tends to grow further in 4Q20. Meanwhile, aromatics and refinery to slowly improve in 4Q20-1H21.
We expect PTTGC’s core earnings to strongly recover in 4Q20, led by margin expansion across all value chains. HDPE spread in 4QTD has already improved by 11%QoQ, while aromatics margin to be supported by economic recovery.
We revise 2020E earnings down to a loss to reflect a weakness in 9M20. However, we maintain a positive view on 2021 performance, led by new capacity.
Adjusted EBITDA was Bt7.4bn (-16%YoY, -3%QoQ). A weak drop was due to weak performance YoY and QoQ in refinery and aromatics BU. However, polymer EBITDA showed a strong recovery QoQ from increasing HDPE spread.
We reiterate our ‘BUY’ rating with the target price at Bt56.5, derived from 0.9xPBV’21E which is equal to -1SD to its 5 year average trading.

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