Buy (17E TP Bt6.00) Company Update
IRPC Buy (17E TP Bt6.00)
Company Update
Close Bt5.20
Energy & Utilities April 5, 2017
Earnings upgrade / Earnings downgrade / Overview unchanged
Weak but not bad 1Q17E earnings Price Performance (%) Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.510
0.577
KT ZMICO vs. consensus Share data
‐11.8%
‐9.9%
Reuters / Bloomberg
IRPC.BK/IRPC TB
Paid‐up Shares (m)
20,434.42
Par (Bt)
1.00
Market cap (Bt bn / US$ m) Foreign limit / actual (%) 52 week High / Low (Bt) Avg. daily T/O (shares 000)
106.00/3,086.00 49.00/12.98 5.45/4.60 115,314.00
NVDR (%)
8.11
Estimated free float (%)
51.9
Beta
0.79
URL
www.irpc.co.th
CGR Anti‐corruption
Level 4 (Certified)
Long‐term growth prospects intact Given the company’s weak but not bad 1Q17E earnings followed by positive earnings momentum in the remaining quarters on the bigger benefits from the Everest project and UHV project, as well as the 300‐ kta PP expansion with the targeted kickoff in 2H17E to be its next growth catalyst in the years ahead, we reaffirm our Buy rating; our 17E TP of Bt6/share does not factor in the PP expansion project. Planned shutdown behind low 1Q17E projected NP at Bt1.23bn We expect IRPC’s 1Q17E NP to be low at Bt1.23bn (‐59% YoY, ‐27% QoQ). Stripping out the projected Bt456mn forex gain, we expect core profit of Bt774mn in 1Q17E, a big drop of 53% YoY and 59% QoQ given the entire one‐month planned shutdown with a lower crude run to 120kbd and minimal stock impact despite the solid market GIM in the quarter. We expect its 1Q17E market GIM at US$13.5/bbl, with the main contribution from petrochemical given the solid PP spread and the sharp rise in styrenic spreads (ABS/PS spreads). Meanwhile, its accounting GIM should stay solid at US$13.5/bbl in 1Q17E (vs. US$11.0/bbl in 1Q16 and US$13.1/bbl in 4Q16), with the minimal stock gain likely to be square with the small hedging loss. Positive earnings momentum to follow in the remaining quarters We expect positive earnings momentum in the remaining quarters (2Q‐ 4Q17E) on the plant resumption with a higher crude run (with the full‐ year average at 180kbd), as well as the ramp up of benefits from the Everest project and UHV project as the main driver. The margin contribution from the UHV project should remain solid in a range of US$2‐2.2/bbl (before netting off the incremental cost) as in 1Q17E alongside the accelerating benefits from the Everest project, with our full‐year incremental margin of US$1.5/bbl (~Bt3.5bn for the year 2017E with Bt650mn likely in 1Q17E vs. the company’s guidance of Bt7.0bn in the year). This will help support our assumed market GIM, enabling it to achieve US$14.0/bbl in 2017E. As such, we maintain our 2017E NP forecast at Bt9.1bn. Spread outlook unchanged – on the softer side but limited downside The PP (over naphtha) spread has performed solidly with the average at US$661/ton in 1Q17 given strong demand in NEA and China, as well as the peak turnaround season of PP plants in the Middle East and Asia. Meanwhile, the global outlook on the PP market in the next few years is not significantly different from the previous estimate, with the delay of Asia’s 2mn ton capacity addition to be stretched out to 2017‐18E (vs. to 2017E earlier), causing the additional supply to exceed demand growth during the period. Thus, the PP spread is projected to be on the softer side in 2017‐18E before moving to equilibrium afterwards, with downside from China’s upstream propylene supply growth (particularly from the uncompetitive and unfriendly coal‐to‐chemical) likely to make the propylene‐chain spreads stronger than expected. Financials and Valuation FY Ended 31 Dec
Patcharin Karsemarnuntana
Revenues (Btmn) Core profit (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
Analyst, no 17834
FY Ended 31 Dec
[email protected] 66 (0) 2695‐5837
PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 214,172 5,641 9,402 0.46 279.59 0.22 3.71 2015 11.30 10.41 1.40 4.23 13.09 69.73
2016 185,041 7,745 9,721 0.48 3.39 0.23 3.96 2016 10.93 8.50 1.31 4.42 12.40 78.78
2017E 198,588 8,990 9,118 0.45 (6.20) 0.22 4.18 2017E 11.65 8.70 1.25 4.29 10.97 75.24
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 236,631 10,686 10,686 0.52 17.20 0.26 4.46 2018E 9.94 7.42 1.17 5.03 12.12 61.64
2019E 236,631 11,096 11,096 0.54 3.84 0.27 4.73 2019E 9.58 6.93 1.10 5.22 11.82 46.94
Figure 1: IRPC’s 1Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense and financial costs Other income Income tax Forex gain (loss) Other extraordinary Items Gn (Ls) from affiliates Minority interests Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Interest‐bearing debt / equity (x) BVPS (Bt) ROE (%)
1Q16 42,575 4,574 4,496 (196) (830) 537 354 ‐ (34) (9) 3,014 1,640 0.15 10.74 10.56 7.08 1.05 16.29 0.72 3.86 15.59
4Q16 51,735 5,154 5,297 (592) (1,081) (162) (184) 3 103 (13) 1,693 1,874 0.09 9.96 10.24 3.27 0.76 6.11 0.81 3.96 8.45
1Q17E 36,269 2,774 3,236 (323) (166) (189) 456 ‐ 25 (5) 1,230 774 0.06 7.65 8.92 3.39 0.78 4.44 0.45 4.02 6.04
% YoY (14.8) (39.4) (28.0) 64.7 (80.0) nm 28.9 nm nm (46.1) (59.2) (52.8) (59.9)
% QoQ (29.9) (46.2) (38.9) (45.5) (84.6) 16.6 nm (100.0) (75.7) (62.4) (27.3) (58.7) (33.1)
2016 185,041 20,140 20,000 (1,502) (3,185) (282) 523 4 125 (31) 9,721 7,745 0.48 10.88 10.81 5.25 0.76 9.37 0.81 3.96 12.40
2017E 198,588 18,779 19,591 (1,851) 560 (2,240) 128 0 50 (20) 9,118 8,990 0.45 9.46 9.87 4.59 0.57 6.75 0.77 4.18 10.97
% YoY 7.3 (6.8) (2.0) 23.2 nm 693.1 (75.5) (100.0) (60.1) (35.1) (6.2) 16.1 (6.2)
YTD (% of 17E) 18% 15% 17% 17% nm 8% 356% nm 50% 25% 13% 9% 13%
Source: KT ZMICO Research
Figure 2: IRPC’s quarterly market GIM (gross integrated margin) breakdown
Figure 3: IRPC’s quarterly market GIM and accounting GIM
Source: Company, KT ZMICO Research
Source: Company, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Movement of PP spread
Figure 5: Movement of styrenic spreads (PS and ABS spreads)
Source: Company, KT ZMICO Research
Source: Company, KT ZMICO Research
Figure 6: The additional supply and demand growth of polypropylene (PP) market
Figure 7: IRPC’s PBV band
Source: Company
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Minority interests Total liab. & shareholder equity CASH FLOW (Btm) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2014 281,589 (287,930) (6,341) (5,444) (6,826) 4,959 (11,785) (1,424) 2,411 (10,798) 2,398 932 2,393 (139) (21) (5,235) (0.26) (0.26) (8,560) (0.42) 0.08
2015 214,172 (197,913) 16,258 (6,172) 15,285 5,199 10,086 (1,192) (702) 8,192 (2,346) (393) 4,154 (184) (21) 9,402 0.46 0.46 5,641 0.28 0.22
2016 185,041 (164,900) 20,140 (6,072) 20,000 5,932 14,068 (1,502) (3,185) 9,382 (282) 523 4 125 (31) 9,721 0.48 0.48 7,745 0.38 0.23
2017E 198,588 (179,809) 18,779 (6,289) 19,591 7,101 12,490 (1,851) 560 11,200 (2,240) 128 0 50 (20) 9,118 0.45 0.45 8,990 0.44 0.22
2018E 236,631 (214,415) 22,217 (7,526) 21,877 7,186 14,691 (1,693) 360 13,358 (2,672) 0 0 50 (50) 10,686 0.52 0.52 10,686 0.52 0.26
2019E 236,631 (214,500) 22,131 (7,526) 21,877 7,272 14,605 (1,095) 360 13,870 (2,774) 0 0 50 (50) 11,096 0.54 0.54 11,096 0.54 0.27
2014 2,009 11,192 25,344 102,120 22,134 162,798 18,641 46,498 94,894 20,434 67,834 70 162,798
2015 3,576 8,942 21,306 115,997 13,352 163,174 7,201 49,235 87,296 20,434 75,804 74 163,174
2016 2,042 9,967 25,783 121,361 13,224 172,378 29,051 36,741 91,373 20,434 80,920 85 172,378
2017E 1,838 10,696 24,631 128,632 12,371 178,170 44,747 21,291 92,732 20,434 85,333 105 178,170
2018E 1,654 12,746 29,372 124,076 12,072 179,920 47,535 10,254 88,697 20,434 91,068 155 179,920
2019E 1,489 12,746 29,384 119,434 11,932 174,984 40,001 6,890 78,061 20,434 96,718 205 174,985
2014 (5,235) (932) 4,959 7,770 6,562 (22,427)
2015 9,402 393 5,199 9,965 24,959 (19,468)
2016 9,721 (523) 5,932 (10,077) 5,052 (11,822)
2017E 9,118 (128) 7,101 1,733 17,823 (14,498)
2018E 10,686 0 7,186 (2,489) 15,383 (2,769)
2019E 11,096 0 7,272 327 18,695 (2,784)
(22,427) 18,427 (710) (1,839) (3,129) 12,749 (3,116) (15,864) (0.78)
(19,468) (8,703) 1,429 (3,065) 6,416 (3,924) 1,567 5,491 0.27
(11,822) 9,355 87 (4,598) 391 5,236 (1,534) (6,769) (0.33)
(14,498) 247 (46) (4,629) 899 (3,529) (204) 3,325 0.16
(2,769) (8,249) (0) (4,951) 402 (12,798) (184) 12,614 0.62
(2,784) (10,898) 0 (5,446) 267 (16,077) (165) 15,912 0.78
2014 (3.8) (266.8) (733.6) (2.3) (2.4) (4.2) (1.9) (3.0) 22.2
2015 (23.9) (323.9) 279.6 7.6 7.1 4.7 4.4 2.6 28.6
2016 (13.6) 30.8 3.4 10.9 10.8 7.6 5.3 4.2 3.0
2017E 7.3 (2.0) (6.2) 9.5 9.9 6.3 4.6 4.5 20.0
2018E 19.2 11.7 17.2 9.4 9.2 6.2 4.5 4.5 20.0
2019E 0.0 0.0 3.8 9.4 9.2 6.2 4.7 4.7 20.0
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, CI.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt5.20
Energy & Utilities April 5, 2017
Earnings upgrade / Earnings downgrade / Overview unchanged
Weak but not bad 1Q17E earnings Price Performance (%) Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.510
0.577
KT ZMICO vs. consensus Share data
‐11.8%
‐9.9%
Reuters / Bloomberg
IRPC.BK/IRPC TB
Paid‐up Shares (m)
20,434.42
Par (Bt)
1.00
Market cap (Bt bn / US$ m) Foreign limit / actual (%) 52 week High / Low (Bt) Avg. daily T/O (shares 000)
106.00/3,086.00 49.00/12.98 5.45/4.60 115,314.00
NVDR (%)
8.11
Estimated free float (%)
51.9
Beta
0.79
URL
www.irpc.co.th
CGR Anti‐corruption
Level 4 (Certified)
Long‐term growth prospects intact Given the company’s weak but not bad 1Q17E earnings followed by positive earnings momentum in the remaining quarters on the bigger benefits from the Everest project and UHV project, as well as the 300‐ kta PP expansion with the targeted kickoff in 2H17E to be its next growth catalyst in the years ahead, we reaffirm our Buy rating; our 17E TP of Bt6/share does not factor in the PP expansion project. Planned shutdown behind low 1Q17E projected NP at Bt1.23bn We expect IRPC’s 1Q17E NP to be low at Bt1.23bn (‐59% YoY, ‐27% QoQ). Stripping out the projected Bt456mn forex gain, we expect core profit of Bt774mn in 1Q17E, a big drop of 53% YoY and 59% QoQ given the entire one‐month planned shutdown with a lower crude run to 120kbd and minimal stock impact despite the solid market GIM in the quarter. We expect its 1Q17E market GIM at US$13.5/bbl, with the main contribution from petrochemical given the solid PP spread and the sharp rise in styrenic spreads (ABS/PS spreads). Meanwhile, its accounting GIM should stay solid at US$13.5/bbl in 1Q17E (vs. US$11.0/bbl in 1Q16 and US$13.1/bbl in 4Q16), with the minimal stock gain likely to be square with the small hedging loss. Positive earnings momentum to follow in the remaining quarters We expect positive earnings momentum in the remaining quarters (2Q‐ 4Q17E) on the plant resumption with a higher crude run (with the full‐ year average at 180kbd), as well as the ramp up of benefits from the Everest project and UHV project as the main driver. The margin contribution from the UHV project should remain solid in a range of US$2‐2.2/bbl (before netting off the incremental cost) as in 1Q17E alongside the accelerating benefits from the Everest project, with our full‐year incremental margin of US$1.5/bbl (~Bt3.5bn for the year 2017E with Bt650mn likely in 1Q17E vs. the company’s guidance of Bt7.0bn in the year). This will help support our assumed market GIM, enabling it to achieve US$14.0/bbl in 2017E. As such, we maintain our 2017E NP forecast at Bt9.1bn. Spread outlook unchanged – on the softer side but limited downside The PP (over naphtha) spread has performed solidly with the average at US$661/ton in 1Q17 given strong demand in NEA and China, as well as the peak turnaround season of PP plants in the Middle East and Asia. Meanwhile, the global outlook on the PP market in the next few years is not significantly different from the previous estimate, with the delay of Asia’s 2mn ton capacity addition to be stretched out to 2017‐18E (vs. to 2017E earlier), causing the additional supply to exceed demand growth during the period. Thus, the PP spread is projected to be on the softer side in 2017‐18E before moving to equilibrium afterwards, with downside from China’s upstream propylene supply growth (particularly from the uncompetitive and unfriendly coal‐to‐chemical) likely to make the propylene‐chain spreads stronger than expected. Financials and Valuation FY Ended 31 Dec
Patcharin Karsemarnuntana
Revenues (Btmn) Core profit (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
Analyst, no 17834
FY Ended 31 Dec
[email protected] 66 (0) 2695‐5837
PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 214,172 5,641 9,402 0.46 279.59 0.22 3.71 2015 11.30 10.41 1.40 4.23 13.09 69.73
2016 185,041 7,745 9,721 0.48 3.39 0.23 3.96 2016 10.93 8.50 1.31 4.42 12.40 78.78
2017E 198,588 8,990 9,118 0.45 (6.20) 0.22 4.18 2017E 11.65 8.70 1.25 4.29 10.97 75.24
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 236,631 10,686 10,686 0.52 17.20 0.26 4.46 2018E 9.94 7.42 1.17 5.03 12.12 61.64
2019E 236,631 11,096 11,096 0.54 3.84 0.27 4.73 2019E 9.58 6.93 1.10 5.22 11.82 46.94
Figure 1: IRPC’s 1Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense and financial costs Other income Income tax Forex gain (loss) Other extraordinary Items Gn (Ls) from affiliates Minority interests Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Interest‐bearing debt / equity (x) BVPS (Bt) ROE (%)
1Q16 42,575 4,574 4,496 (196) (830) 537 354 ‐ (34) (9) 3,014 1,640 0.15 10.74 10.56 7.08 1.05 16.29 0.72 3.86 15.59
4Q16 51,735 5,154 5,297 (592) (1,081) (162) (184) 3 103 (13) 1,693 1,874 0.09 9.96 10.24 3.27 0.76 6.11 0.81 3.96 8.45
1Q17E 36,269 2,774 3,236 (323) (166) (189) 456 ‐ 25 (5) 1,230 774 0.06 7.65 8.92 3.39 0.78 4.44 0.45 4.02 6.04
% YoY (14.8) (39.4) (28.0) 64.7 (80.0) nm 28.9 nm nm (46.1) (59.2) (52.8) (59.9)
% QoQ (29.9) (46.2) (38.9) (45.5) (84.6) 16.6 nm (100.0) (75.7) (62.4) (27.3) (58.7) (33.1)
2016 185,041 20,140 20,000 (1,502) (3,185) (282) 523 4 125 (31) 9,721 7,745 0.48 10.88 10.81 5.25 0.76 9.37 0.81 3.96 12.40
2017E 198,588 18,779 19,591 (1,851) 560 (2,240) 128 0 50 (20) 9,118 8,990 0.45 9.46 9.87 4.59 0.57 6.75 0.77 4.18 10.97
% YoY 7.3 (6.8) (2.0) 23.2 nm 693.1 (75.5) (100.0) (60.1) (35.1) (6.2) 16.1 (6.2)
YTD (% of 17E) 18% 15% 17% 17% nm 8% 356% nm 50% 25% 13% 9% 13%
Source: KT ZMICO Research
Figure 2: IRPC’s quarterly market GIM (gross integrated margin) breakdown
Figure 3: IRPC’s quarterly market GIM and accounting GIM
Source: Company, KT ZMICO Research
Source: Company, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Movement of PP spread
Figure 5: Movement of styrenic spreads (PS and ABS spreads)
Source: Company, KT ZMICO Research
Source: Company, KT ZMICO Research
Figure 6: The additional supply and demand growth of polypropylene (PP) market
Figure 7: IRPC’s PBV band
Source: Company
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Minority interests Total liab. & shareholder equity CASH FLOW (Btm) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2014 281,589 (287,930) (6,341) (5,444) (6,826) 4,959 (11,785) (1,424) 2,411 (10,798) 2,398 932 2,393 (139) (21) (5,235) (0.26) (0.26) (8,560) (0.42) 0.08
2015 214,172 (197,913) 16,258 (6,172) 15,285 5,199 10,086 (1,192) (702) 8,192 (2,346) (393) 4,154 (184) (21) 9,402 0.46 0.46 5,641 0.28 0.22
2016 185,041 (164,900) 20,140 (6,072) 20,000 5,932 14,068 (1,502) (3,185) 9,382 (282) 523 4 125 (31) 9,721 0.48 0.48 7,745 0.38 0.23
2017E 198,588 (179,809) 18,779 (6,289) 19,591 7,101 12,490 (1,851) 560 11,200 (2,240) 128 0 50 (20) 9,118 0.45 0.45 8,990 0.44 0.22
2018E 236,631 (214,415) 22,217 (7,526) 21,877 7,186 14,691 (1,693) 360 13,358 (2,672) 0 0 50 (50) 10,686 0.52 0.52 10,686 0.52 0.26
2019E 236,631 (214,500) 22,131 (7,526) 21,877 7,272 14,605 (1,095) 360 13,870 (2,774) 0 0 50 (50) 11,096 0.54 0.54 11,096 0.54 0.27
2014 2,009 11,192 25,344 102,120 22,134 162,798 18,641 46,498 94,894 20,434 67,834 70 162,798
2015 3,576 8,942 21,306 115,997 13,352 163,174 7,201 49,235 87,296 20,434 75,804 74 163,174
2016 2,042 9,967 25,783 121,361 13,224 172,378 29,051 36,741 91,373 20,434 80,920 85 172,378
2017E 1,838 10,696 24,631 128,632 12,371 178,170 44,747 21,291 92,732 20,434 85,333 105 178,170
2018E 1,654 12,746 29,372 124,076 12,072 179,920 47,535 10,254 88,697 20,434 91,068 155 179,920
2019E 1,489 12,746 29,384 119,434 11,932 174,984 40,001 6,890 78,061 20,434 96,718 205 174,985
2014 (5,235) (932) 4,959 7,770 6,562 (22,427)
2015 9,402 393 5,199 9,965 24,959 (19,468)
2016 9,721 (523) 5,932 (10,077) 5,052 (11,822)
2017E 9,118 (128) 7,101 1,733 17,823 (14,498)
2018E 10,686 0 7,186 (2,489) 15,383 (2,769)
2019E 11,096 0 7,272 327 18,695 (2,784)
(22,427) 18,427 (710) (1,839) (3,129) 12,749 (3,116) (15,864) (0.78)
(19,468) (8,703) 1,429 (3,065) 6,416 (3,924) 1,567 5,491 0.27
(11,822) 9,355 87 (4,598) 391 5,236 (1,534) (6,769) (0.33)
(14,498) 247 (46) (4,629) 899 (3,529) (204) 3,325 0.16
(2,769) (8,249) (0) (4,951) 402 (12,798) (184) 12,614 0.62
(2,784) (10,898) 0 (5,446) 267 (16,077) (165) 15,912 0.78
2014 (3.8) (266.8) (733.6) (2.3) (2.4) (4.2) (1.9) (3.0) 22.2
2015 (23.9) (323.9) 279.6 7.6 7.1 4.7 4.4 2.6 28.6
2016 (13.6) 30.8 3.4 10.9 10.8 7.6 5.3 4.2 3.0
2017E 7.3 (2.0) (6.2) 9.5 9.9 6.3 4.6 4.5 20.0
2018E 19.2 11.7 17.2 9.4 9.2 6.2 4.5 4.5 20.0
2019E 0.0 0.0 3.8 9.4 9.2 6.2 4.7 4.7 20.0
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, CI.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
