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

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Thai Equity - Bottom-up - Equities

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Pi Securities PCL, Thailand

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Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<ul>
<li>IVL announced completion of Oxiteno acquisition and consolidation of assets beginning April 2022 (earnings recognition 2Q22 onwards). We have a positive view on the deal given the earnings accretion </li>
<li>Strong surfactants business footprint, as post integration IVL will hold 20% of America’s total EO capacities and 25% market share of nonionic surfactants.</li>
<li>We estimate the new asset to contribute US$200m to IVL’s EBITDA in 2022 (10% of IVL’s 2022E EBITDA) and increase thereafter, thanks to synergy benefits from efficient asset utilization. </li>
</ul>


IVL announced completion of Oxiteno acquisition and consolidation of assets beginning April 2022 (earnings recognition 2Q22 onwards). We have a positive view on the deal given the earnings accretion 
Strong surfactants business footprint, as post integration IVL will hold 20% of America’s total EO capacities and 25% market share of nonionic surfactants.
We estimate the new asset to contribute US$200m to IVL’s EBITDA in 2022 (10% of IVL’s 2022E EBITDA) and increase thereafter, thanks to synergy benefits from efficient asset utilization. 


<p><strong>We have a positive view on IVL’s new acquisition of Oxiteno given the inexpensive deal, earnings accretion and synergy benefits. We maintain the BUY recommendation based on a target price to Bt46.0, derived from 1.9xPBV’21E which is equal to world material sector. and reflect a soften PET spread in 2H21.</strong></p><div>• IVL announced acquisition of 100% stake in Oxiteno S.A Brazil (Oxiteno), a leading integrated surfactants producer catering to end-use markets in Latin America.</div><div></div><div>• The total investment is US$1.3bn, which will be fully financed through differed payments,  free cash flow and debts. No capital call is expected, and transaction tend to be completed by 1Q22.</div><div></div><div>• We expect 2H21 earnings to slightly soften from 1H21 as we expect PET spread to decline following supply easing (lower container freight). Meanwhile, restart of Lake Charles cracker will support IOD volume and spread from 3Q21.</div><div>•Announced interim dividend of Bt0.25/sh, XD is on 27th Aug 2021.</div>

We have a positive view on IVL’s new acquisition of Oxiteno given the inexpensive deal, earnings accretion and synergy benefits. We maintain the BUY recommendation based on a target price to Bt46.0, derived from 1.9xPBV’21E which is equal to world material sector. and reflect a soften PET spread in 2H21.• IVL announced acquisition of 100% stake in Oxiteno S.A Brazil (Oxiteno), a leading integrated surfactants producer catering to end-use markets in Latin America.• The total investment is US$1.3bn, which will be fully financed through differed payments,  free cash flow and debts. No capital call is expected, and transaction tend to be completed by 1Q22.• We expect 2H21 earnings to slightly soften from 1H21 as we expect PET spread to decline following supply easing (lower container freight). Meanwhile, restart of Lake Charles cracker will support IOD volume and spread from 3Q21.•Announced interim dividend of Bt0.25/sh, XD is on 27th Aug 2021.

IVL: Value Accretion from Oxiteno Acquisition

<p><strong>We reiterate a BUY rating and upgrade our target price to Bt55.0 (from Bt50), derived from 2.2xPBV’21E which is equal to world material peer.</strong></p><div>• IVL posted a 1Q21 net profit of Bt6bn (953%YoY, 359%QoQ), highest level since 3Q18.</div><div></div><div>• Excluding stock gain at Bt3.2bn and unusual items, its core profit was Bt3.56bn (133%YoY, 144%QoQ), mainly driven by a recovery in all businesses and improved integrated PET spread.</div><div></div><div>• We revise 2021-22E earnings up by 33-39% to factor in upswing momentum in petrochemical spread. Also, we upgrade our target price to Bt55.0 (from Bt50), derived from 2.2xPBV’21E which is equal to world material sector.</div><div></div><div>• We expect 2Q21 earnings to slightly soften QoQ due to turnaround in EG business (1 month), while core PET and fiber will continue enjoy economic recovery and strong PET spread.</div><div></div><div><div></div></div>

We reiterate a BUY rating and upgrade our target price to Bt55.0 (from Bt50), derived from 2.2xPBV’21E which is equal to world material peer.• IVL posted a 1Q21 net profit of Bt6bn (953%YoY, 359%QoQ), highest level since 3Q18.• Excluding stock gain at Bt3.2bn and unusual items, its core profit was Bt3.56bn (133%YoY, 144%QoQ), mainly driven by a recovery in all businesses and improved integrated PET spread.• We revise 2021-22E earnings up by 33-39% to factor in upswing momentum in petrochemical spread. Also, we upgrade our target price to Bt55.0 (from Bt50), derived from 2.2xPBV’21E which is equal to world material sector.• We expect 2Q21 earnings to slightly soften QoQ due to turnaround in EG business (1 month), while core PET and fiber will continue enjoy economic recovery and strong PET spread.

IVL: Solid Outlook in 2Q21 from Seasonality

<p><strong>We reiterate a BUY rating and upgrade our target price to Bt50.0, derived from 2xPBV’21E. We expect IVL’s earnings to strongly improve in 1Q21 following an oil price and spread recovery and expect earning peak in 2Q21 from seasonality.</strong></p><div>• IVL posted a net profit of Bt1,310m (flipped from a loss YoY, 245%QoQ).</div><div></div><div>• Excluding stock gain at Bt798m and unusual items, its core profit was Bt1,459m (841%YoY,</div><div>82%QoQ), mainly improved by integrated PET spread, increase in sales volume and fiber margin.</div><div></div><div>• We have a positive view on IVL’s earnings and expect a YoY and QoQ growth in 1H21 following a spread recovery and seasonality in 2Q21.</div><div></div><div>• We upgrade our target price to Bt50.0 (from Bt30), derived from 2xPBV’21E which is equal to world material sector.</div><div></div><div>• Integrated PET spread QTD spikes to US$526/Ton (32%YoY, 27%QoQ).</div>

We reiterate a BUY rating and upgrade our target price to Bt50.0, derived from 2xPBV’21E. We expect IVL’s earnings to strongly improve in 1Q21 following an oil price and spread recovery and expect earning peak in 2Q21 from seasonality.• IVL posted a net profit of Bt1,310m (flipped from a loss YoY, 245%QoQ).• Excluding stock gain at Bt798m and unusual items, its core profit was Bt1,459m (841%YoY,82%QoQ), mainly improved by integrated PET spread, increase in sales volume and fiber margin.• We have a positive view on IVL’s earnings and expect a YoY and QoQ growth in 1H21 following a spread recovery and seasonality in 2Q21.• We upgrade our target price to Bt50.0 (from Bt30), derived from 2xPBV’21E which is equal to world material sector.• Integrated PET spread QTD spikes to US$526/Ton (32%YoY, 27%QoQ).

IVL: Expect Strong Earnings Momentum in 1Q21 and Peak in 2Q21

<p><strong>Analyst meeting yesterday came out with a neutral tone. We expect 4Q20 core operation to gradual recover, led by sales volume growth in all business units and margin improvement in IOD unit. </strong></p><ul>
<li>We foresee a slight recovery in IVL’s earnings in 4Q20, as we expect sales volume to continuously grow QoQ. Also, we believe fiber, MEG and MTBE margin to start improving after polyester and oil consumption have recovered in 3Q20.</li>
<li>Meanwhile, we expect core PET business to strengthen as PET margin in US and Europe starts to rise in September.</li>
<li>IVL reported a core profit at Bt800m (-71%YoY, -69%QoQ). A weak performance was dragged by i) margin contraction in combine PET and IOD products and ii) plant shutdown due to hurricane Laura and lightning strike (in IOD unit), despite sales volume growth YoY and QoQ.</li>
<li>We revise down 2020E earning by 70% to factor in a weakness in 3Q2o.</li>
</ul><p><strong>We maintain our BUY rating with a trimmed target price at Bt30.0 (from Bt32), based on 14.4xPE’21E which is equal to world materials sector average.</strong></p>

Analyst meeting yesterday came out with a neutral tone. We expect 4Q20 core operation to gradual recover, led by sales volume growth in all business units and margin improvement in IOD unit. 
We foresee a slight recovery in IVL’s earnings in 4Q20, as we expect sales volume to continuously grow QoQ. Also, we believe fiber, MEG and MTBE margin to start improving after polyester and oil consumption have recovered in 3Q20.
Meanwhile, we expect core PET business to strengthen as PET margin in US and Europe starts to rise in September.
IVL reported a core profit at Bt800m (-71%YoY, -69%QoQ). A weak performance was dragged by i) margin contraction in combine PET and IOD products and ii) plant shutdown due to hurricane Laura and lightning strike (in IOD unit), despite sales volume growth YoY and QoQ.
We revise down 2020E earning by 70% to factor in a weakness in 3Q2o.
We maintain our BUY rating with a trimmed target price at Bt30.0 (from Bt32), based on 14.4xPE’21E which is equal to world materials sector average.

Thailand

Indorama Ventures is a global petrochemical producer specializing in intermediate petrochemicals and polymers. The company is the world's largest producer of PET resins, and also manufactures polyester fibers and yarns, purified terephthalic acid (PTA), ethylene oxide (EO), and ethylene glycol (EG). Indorama Ventures is headquartered in Bangkok, Thailand, and was founded in 1994.

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Indorama Ventures (IVL TB)

IVL: Oxiteno Earnings to Kick in by 2Q22

IVL announced completion of Oxiteno acquisition and consolidation of assets beginning April 2022 (earnings recognition 2Q22 onwards). We have a...

Pi Securities PCL, Thailand

IVL: Value Accretion from Oxiteno Acquisition

We have a positive view on IVL’s new acquisition of Oxiteno given the inexpensive deal, earnings accretion and synergy benefits. We maintain the...

Pi Securities PCL, Thailand

IVL: Solid Outlook in 2Q21 from Seasonality

We reiterate a BUY rating and upgrade our target price to Bt55.0 (from Bt50), derived from 2.2xPBV’21E which is equal to world material peer.

Pi Securities PCL, Thailand

IVL: Expect Strong Earnings Momentum in 1Q21 and Peak in 2Q21

We reiterate a BUY rating and upgrade our target price to Bt50.0, derived from 2xPBV’21E. We expect IVL’s earnings to strongly improve in 1Q21...

Pi Securities PCL, Thailand

IVL: Expects a Gradual Recovery in 4Q20

We foresee a slight recovery in IVL’s earnings in 4Q20, as we expect sales volume to grow QoQ. Also, we believe fiber, MEG and MTBE margin to start...

Pi Securities PCL, Thailand

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