Petrochemical & Refiner Petrochemical

Petrochemical & Refinery  Petrochemical 

 

- Aromatics spread shows biggest week on week increase 

Most petrochemical spreads have declined over the past week as a price of raw material, Naphtha, increased as much as 6.3%wow. Only aromatics spread has widened significantly following a surge of 6.6%wow and 7.8%wow in Px and Bz prices, respectively, after an explosion at an aromatics plant with a production capacity of 1.6 million tons per year of Dragon Aromatics Company in China in early April. Yet, the increasing Px price will depress PTA-Px spread by 39.0%wow. However, overall petrochemical prices are anticipated to increase next week following an increase in Naphtha price, so overall spreads of olefins would get back to a normal level again.  

- Quarter on quarter profit growth expected in 1Q15 

We believe the sector would be able to show net profit again in 1Q15, driven by GRM (Singapore) that has risen 35.2%qoq due to a seasonal effect and because there will not be massive stock loss like in the prior quarter. For the petrochemical business, overall spreads may weaken slightly from 4Q14 but would widen again in 2Q15 for both olefins and aromatics. IRPC would book extraordinary profit of around B3bn as well. 

- Speculate TOP, PTTGC, ESSO. IRPC is top pick in long run 

We maintain NEUTRAL for the sector. For the short term, the wider aromatics spreads will benefit TOP, PTTGC, and ESSO; we recommend trading these stocks. However, for a long term, we select IRPC([email protected]) as a top pick for its promising performance in 2015; the profit is anticipated to surge strongly in 1Q15 as a result of GRM and extraordinary income, while UHV project, which will be complete and start a commercial run since October 1, 2015 onward, will help widen IRPC profit base. We also recommend buying PTTGC ([email protected]) for its share price is the most laggard among peers and IVL([email protected]) for its profit would make a new high continuously.