First Read PTT Global Chemical: Q226E preview - strong performance led by O&D

Research evidence excerpt

First Read PTT Global Chemical: Q226E preview - strong performance led by O&D

Forecast returns

Forecast price appreciation 17.3%

Forecast dividend yield 1.3%

Forecast stock return 18.7%

Market return assumption 7.2%

Forecast excess return 11.5%

Company Description

PTT Global Chemical (PTTGC), a 49%-owned subsidiary of PTT Public, is the merged PTT

Chemical and PTT Aromatics entity. PTTGC has 2.9mt of olefin capacity, and 2.2mt of

benzene, toluene and xylene (BTX) capacity. Its refining assets consist of a 145,000bpd

complex crude oil refinery and two condensate splitters with 70,000bpd and 65,000bpd

capacity.

Valuation Method and Risk Statement

We base our price target on the P/BV valuation methodology.

For PTTGC, there is counter-party risk, as parent company PTT is a major supplier of its

feedstock and a key customer of its refined products. A potential change in the gas price

structure would also have a negative implication on earnings. Petrochemical spreads are

affected by industry cycles, which are driven by the balance of industry supply and demand.

Weaker-than-expected global macroeconomic growth, especially in China, could be a key

demand risk. On the supply side, we think the major risks are unexpected operating issues

that result in plant shutdowns, which could translate into short-term support for chemical

prices but could mean lower operating rates and earnings losses for a particular company. For

refining operations, key drivers such as oil prices and refining margins can be volatile, highly

cyclical, and seasonal. Therefore, changes in global GDP growth or seasonal demand can

materially impact our earnings estimates. In addition, government intervention in oil pricing