Indorama Ventures

Indorama Ventures Plc (IVL) 

- Bt625 mn net loss projected in 4Q14  

 

We project IVL to face net loss of approximately B625m in 4Q14, versus B587m net profit in 3Q14, due to inventory loss of B1.9bn. Excluding the inventory loss, the company’s normalized profit is projected to show almost double growth from 3Q14 to B1.3bn, thanks to rising spreads. Overall, FY2014 net profit is estimated at B1.8bn, growing 36.7%yoy, worse than our initial forecast. 

 

- FY2014 forecast cut; high growth expected in FY2015   

 

We revise down our FY2014 earnings forecast by 39.6% to reflect the aforementioned worse-than-expected performance of IVL in 4Q14. However, we maintain our forecast for FY2015, projecting the profit to show double growth from FY2014 to B4.2bn, under the following assumptions: 1) sales volume increasing 11.1%yoy to 7 million tons, 2) low Px cost benefiting PET and PTA spreads, and 3) limited downsides of PET, PTA, and MEG prices because the current prices are already standing at five-year lows, meaning no significant inventory loss from now on. 

 

- Share price substantially reflects bad factors. Buy   

 

Under the new forecast, 2015 fair value (DCF) is B30.50 (previously B33). The share price has fallen as much as 20% over the past five months, likely substantially absorbed all negative factors. Therefore, we recommend buying IVL; normalized profit is projected to show strong growth continuously in the next five years.