Indorama Ventures

Indorama Ventures Plc (IVL) 

 

- Net profit still possible in 3Q15 despite sharp fall 

We estimate IVL's 3Q15 net profit at B240m, plunging 95.4%qoq. Although inventory loss would be as high as B1.3bn, the company's normalized earnings would remain strong as usual. In addition, there would be extraordinary profit of B141m from negative goodwill from acquisition of Cepsa PTA in Canada and B40m from Fx gain. However, excluding extraordinary items, IVL's normalized profit is estimated at B1.3bn, falling 16.4%qoq because of the following factors: 1) sales volume is expected to slip by 1.4%qoq to 1.79 million tons, and 2) 3Q15 EBITDA is projected to drop 4.1%qoq to US$92/ton. Overall, 9M15 net profit is estimated at B5.7bn, leaping 133.9%yoy and making up 89.9% of 2015 earnings forecast. 

- Profit to grow in 4Q15, further in 2016  

We maintain our 2015 earnings forecast, expecting 4Q15 profit to rebound as inventory loss would not be as high as 3Q15. Sales volume is projected to grow after MEG plant resumes work at its full capacity and PTTGC supplies Px raw material as usual. Spreads are expected to rebound from the lowest point in 3Q15, thus boosting 4Q15 EBITDA to US$93-95/ton. Overall, IVL's net profit is projected to jump 420%yoy in 2015 and grow 19.1%yoy in 2016 as sales volume is expected to rise by 7.1%yoy and EBITDA may improve to US$100/ton.  

- Sector's top pick 

2015 fair value (DCF) is B33. Despite unattractive dividend, its earnings are likely to make new highs in the next two or three years.