20170227-辉立证券-Upbeat_HDPE__PP_price_outlook_in_1HFY17_12页_1mb

IRPC Summary

Core Content

IRPC (Inchon Refining and Petrochemical Public Company Limited) is a Thai company operating in the energy and utilities sector, listed on the Stock Exchange of Thailand (SET). The report provides an analysis of its financial performance, earnings outlook, and corporate governance.

Main Points

• Earnings Outlook:

  • IRPC is expected to see a recovery in earnings in 2QFY17 after a slowdown in 1QFY17 due to a 30-day planned maintenance shutdown.
  • HDPE and PP prices are expected to rise in 1HFY17, driven by restocking activities following the Chinese New Year and maintenance shutdowns in Asia and the Middle East.
  • For 1HFY17, HDPE and PP prices are projected to be higher than $1,133/ton and $1,096/ton at end-FY16, respectively.
  • In 4QFY16, IRPC's profit is forecasted to rise by 38% to Bt1.8bn, due to improved refinery performance, despite a weak petrochemical business.
  • If 4QFY16 results meet expectations, IRPC's FY16 profit is expected to be Bt9.8bn, up 5% y-y.

• Rating and Target Price:

  • IRPC is rated 'BUY' with a target price of Bt6/share for FY17.
  • The current closing price is Bt5.20, with a target price of Bt6.00, representing a 17.5% increase.

• Financials:

  • Sales (Btmn):
    • FY15: 199,595
    • FY16E: 166,543
    • FY17E: 176,916
    • FY18E: 176,916
  • Net Profit (Btmn):
    • FY15: 9,402
    • FY16E: 9,832
    • FY17E: 9,122
    • FY18E: 11,648
  • EPS (Bt):
    • FY15: 0.46
    • FY16E: 0.48
    • FY17E: 0.45
    • FY18E: 0.57
  • P/E (X):
    • FY15: 11.3
    • FY16E: 10.8
    • FY17E: 11.6
    • FY18E: 9.1
  • BVPS (Bt):
    • FY15: 3.71
    • FY16E: 3.97
    • FY17E: 4.30
    • FY18E: 4.76
  • P/B (X):
    • FY15: 1.4
    • FY16E: 1.3
    • FY17E: 1.2
    • FY18E: 1.1

• Balance Sheet:

  • Cash (Btmn):
    • FY15: 3,576
    • FY16E: 2,209
    • FY17E: 5,199
    • FY18E: 6,957
  • Total Current Assets (Btmn):
    • FY15: 35,984
    • FY16E: 30,389
    • FY17E: 33,085
  • PPE (Btmn):
    • FY15: 114,807
    • FY16E: 118,620
    • FY17E: 120,353
  • Total Non-Current Assets (Btmn):
    • FY15: 127,189
    • FY16E: 130,578
    • FY17E: 132,108
  • Total Assets (Btmn):
    • FY15: 163,174
    • FY16E: 160,967
    • FY17E: 165,193
  • Total Current Liabilities (Btmn):
    • FY15: 36,210
    • FY16E: 32,014
    • FY17E: 32,579
  • Total Non-Current Liabilities (Btmn):
    • FY15: 51,086
    • FY16E: 41,025
    • FY17E: 35,262
  • Shareholder Equities (Btmn):
    • FY15: 75,458
    • FY16E: 75,804
    • FY17E: 81,141

• Cash Flow:

  • Cashflow from Ops (Btmn):
    • FY15: 27,840
    • FY16E: 18,959
    • FY17E: 19,751
  • CAPEX, net (Btmn):
    • FY15: -17,123
    • FY16E: -10,000
    • FY17E: -10,000
  • Net Change in Cash (Btmn):
    • FY15: 1,567
    • FY16E: 2,990
    • FY17E: 1,758

• Valuation Ratios:

  • P/E (X), adj.:
    • FY15: 9.3
    • FY16E: 10.9
    • FY17E: 9.2
    • FY18E: 9.1
  • P/B (X), adj.:
    • FY15: 1.4
    • FY16E: 1.3
    • FY17E: 1.2
    • FY18E: 1.1
  • Dividend Yield (%):
    • FY15: 4.2
    • FY16E: 2.3
    • FY17E: 2.1
    • FY18E: 2.7

• Growth:

  • Revenue Growth (%):
    • FY15: -26.88
    • FY16E: -22.14
    • FY17E: 7.17
    • FY18E: 6.23
  • EBITDA Growth (%):
    • FY15: n.m.
    • FY16E: 20.02
    • FY17E: -1.63
    • FY18E: 17.48
  • EBIT Growth (%):
    • FY15: n.m.
    • FY16E: 16.92
    • FY17E: -1.70
    • FY18E: 23.90
  • Net Profit Growth (%):
    • FY15: n.m.
    • FY16E: -14.89
    • FY17E: 18.60
    • FY18E: 0.68

• Margins:

  • EBITDA Margin (%):
    • FY15: 8.53
    • FY16E: 13.16
    • FY17E: 12.08
    • FY18E: 13.35
  • EBIT Margin (%):
    • FY15: 5.80
    • FY16E: 8.71
    • FY17E: 7.99
    • FY18E: 9.32
  • Net Profit Margin (%):
    • FY15: 4.71
    • FY16E: 6.33
    • FY17E: 5.48
    • FY18E: 6.58

• Key Ratios:

  • ROE (%):
    • FY15: 12.57
    • FY16E: 13.72
    • FY17E: 12.70
    • FY18E: 14.84
  • ROA (%):
    • FY15: 5.77
    • FY16E: 6.23
    • FY17E: 5.82
    • FY18E: 7.14
  • Net Debt/(Cash) (Btmn):
    • FY15: 45,863
    • FY16E: 34,238
    • FY17E: 26,735
  • Net Gearing (X):
    • FY15: 0.51
    • FY16E: 0.45
    • FY17E: 0.42
    • FY18E: 0.37

Key Information

• Company Segments:

  • Petroleum Products: Refinery oil, lubricant oil, asphalt
  • Petrochemical Products: Olefins, aromatics, styrenics
  • Other Businesses: Power plants, jetties, port and tank farm services, asset management

• Key Developments:

  • In 2015, signed a construction contract for the PP Expansion Project (PPE) and PP Compounding Project (PPC).
  • In 2014, included in the Dow Jones Sustainability Emerging Markets Index and settled disputes with the Liaopairattana family.
  • In 2013, sold 3,312 rai of unused land in Rayong and divested 51% stake in IRPC Clean Power to GPSC.

• Risk Factors:

  • Crude oil volatility and weakness in petroleum and petrochemical sectors
  • Unplanned maintenance shutdown
  • Delays in projects under development

Peer Comparison (as of 01 February 2017)

Corporate Governance

• Participation in Thai CAC:

  • Declared companies include: 2S, A, ABC, ACAP, AEC, AF, AGE, AH, AI, AIE, AIRA, ALUCON, AMARIN, AMATA, ANAN, AOT, AP, APCO, APCS, APURE, AQUA, AS, ASIA, ASIAN, ASIMAR, ASK, BCH, BEAUTY, BFIT, BH, BIGC, BJC, BKG, BLAND, BROCK, BROOK, BRR, BSM, BTNC, CEN, CGH, CHARAN, CHO, CHOTI, CHOW, CI, CM, COL, CPI, CPN, CSL, DCC, DEMCO, DIMET, DRT, DTAC, DTC, EASTW, ECL, EGCO, ERW, FE, FNS, FP1, FSS, GBX, GCAP, GLOW, HANA, HTC, ICC, IFEC, INTUCH, IPRC, IVL, KBANK, KCE, KGI, KKP, KTB, KTC, LANNA, LHBANK, LHK, MBK, MBKET, MFC, MINT, MJD, MK, MPG, MTLS, NCH, NCL, NDR, NINE, NMG, NNCL, NPP, NTV, NUSA, OCC, OGC, PACE, PAF, PCA, PCSGH, PDG, PDI, PIMO, PK, PLANB, PLAT, PRANDA, PREB, PRG, PRINC, PSTC, PYLON, QH, RML, ROBINS, ROCK, ROH, ROJNA, RP, RWI, SAMCO, SANKO, SAUCE, SC, SCCC, SCN, SEAOIL, SE-ED, SENA, SGP, SITHAI, SKR, SMIT, SMK, SORKON, SPALI, SPCG, SPPT, SPRC, SR, SRICHA, STA, STANLY, SUPER, SUSCO, SYMC, SYNEX, SYNTEC, TAE, TAKUNI, TASCO, TBSP, TEAM, TFG, TFI, THAI, TIC, TICON, TIP, TIPCO, TISCO, TMB, TMD, TMT, TPA, TPP, TRT, TRU, TRUE, TSE, TSTE, TTW, TUW, TVD, TVO, TVT, TWPC, U, UBIS, UKEM, UNIQ, UOBKH, UREKA, UWC, VGI, VIBHA, VNT, WAVE, WHA, WICE, WIK, WIN, XO, ZMICO

• Certified Companies:

  • ADVANC, AKP, AMANAH, ASP, AYUD, BAFS, BANPU, BAY, BBL, BCP, BKI, BLA, BTS, BWG, CENTEL, CFRESH, CIMBT, CNS, CPI, CPN, CSL, DCC, DEMCO, DIMET, DRT, DTAC, DTC, EASTW, ECL, EGCO, ERW, FE, FSS, GBX, GCAP, GLOW, HANA, HTC, ICC, IFEC, INTUCH, IPRC, IVL, KBANK, KCE, KGI, KKP, KTB, KTC, LANNA, LHBANK, LHK, MBK, MBKET, MFC, MINT, MONO, MOONG, MSC, MTI, NKI, NSI, OCEAN, PB, PE, PG, PHOL, PM, PPP, PPS, PR, PSL, PT, PTG, PTT, PTTEP, PTTGC, Q-CON, QLT, RATCH, S & J, SABINA, SAT, SCB, SCC, SCG, SINGER, SIS, SMC, SNC, SNP, SPC, SPI, SSF, SSI, SSSC, SVI, TCAP, TCMC, TFG, TGCI, THAN, THRE, THREL, TIPCO, TISCO, TMB, TMD, TMT, TPC, TPCORP, TSC, TSTH, TTCL, TVI, WACOAL

• Non-participation:

  • AAV, ACC, ADAM, AEONTS, AHC, AFC, AIT, AJ, AUD, AKR, ALLA, ALT, AMATAV, AMC, APX, AQ, ARIP, ARROW, ASEFA, ASN, ATP30, AUCT, BA, BAT-3K, BCPG, BDMS, BEC, BEM, BGT, BIG, BIZ, BJC, BUSS, BM, BOL, BPP, BR, BRC, BSM, BTC, BTW, BUI, CBG, CCET, CCN, CCP, CGD, CHEWA, CHG, CHUO, CIG, CITY, CK, CKP, CMO, CMR, CNT, COLOR, COM7, COMAN, CPH, CPR, CRANE, CSP, CTW, CWT, DAI, DCON, DCORP, DRACO, DSGT, DTCI, EARTH, EASON, EIC, EKH, EMC, EPG, ESSO, F&D, FANCY, FMT, FN, FOCUS, FORTH, GENCO, GJS, GL, GLAND, GOLD, GRAND, GSTEL, GTB, GYT, HARN, HFT, HPT, HTECH, HYDRO, IHL, IRCP, IT, ITD, ITEL, JCT, JSP, JWD, KAMART, KCM, KDH, KIAT, KKC, KOOL, KTIS, KWG, LDC, LEE, LH, LIT, LOXLEY, LPH, LST, MACO, MAJOR, M-CHAI, MDX, MFEC, MJ, MPG, MTI, MTLS, NCH, NCL, NDR, NKI, NSI, OCEAN, PB, PE, PG, PHOL, PM, PPP, PPS, PR, PSL, PT, PTG, PTT, PTTEP, PTTGC, Q-CON, QLT, RATCH, S & J, SABINA, SAT, SCB, SCC, SCG, SINGER, SIS, SMPC, SNC, SNP, SPC, SPI, SSF, SSI, SSSC, SVI, TCAP, TCMC, TFG, TFI, THAI, TIC, TICON, TIP, TISCO, TMB, TMD, TMT, TPC, TPCORP, TSC, TSTH, TTCL, TVI, WACOAL

Summary

IRPC is a Thai energy and utilities company that has experienced fluctuations in its financial performance. Despite a slowdown in Q1FY17 due to a maintenance shutdown, the company is expected to recover in Q2FY17 with higher HDPE and PP prices. The report highlights IRPC's strong refinery performance in Q4FY16, contributing to a 38% increase in profit. The company is rated 'BUY' with a target price of Bt6/share for FY17. IRPC's financials show a mix of growth and contraction across various metrics, with key ratios indicating a relatively stable position. The company is involved in several key projects and has a history of corporate governance improvements, including participation in the Thai CAC program.