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The broker expects PTT Chemical's earnings to recover starting from this year's second quarter, because sales volume should pick up strongly after a major maintenance shut-down in the first quarter.

The company should fare even better in the second half of the year, because there will be no plant shut-downs. In addition, product prices and margins are likely to stay high towards the end of the year, due to continued strong demand and limited new capacity. Oil prices are likely to stay high, which will be positive for petrochemical prices overall.

PTT Chemical should benefit from current high oil prices and book better margins than its peers, because it uses ethane gas as its main feedstock. While its regional peers are heavily dependent on naphtha feedstock (85 per cent), PTT Chemical has an advantage, because its feedstock is based on 25-per-cent naphtha and 75-per-cent ethane gas.

The benefits of using ethane gas include reliable and secured feedstock supplies from PTT in the Gulf of Thailand and lower costs compared with naphtha, especially during periods of high oil prices.

The company should begin to realise better profits from its downstream investments, resulting from higher margins.

The broker has raised its earnings per share forecasts for PTT Chemical by 7.7-8.7 per cent for 2008-09, because it has increased product-to-feed margin assumptions 5 per cent in response to better margin expectations for both upstream and downstream products.