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Published on January 26, 2008

The brokerage house expects the shutdown announced on Thursday to result in a 1.7-per-cent fall in PTTCH's olefins production this year, and a drop of 1-2 per cent in net profit.

"However, we maintain our 2008 net profit forecast of Bt18.43 billion, implying growth of 15 per cent year on year. Production losses should be offset by higher capacity utilisation after the plant restarts. With potential upside of 44 per cent to our target price of Bt133, we reiterate our 'Buy' rating on PTTCH," it said yesterday.

PTTCH said on Thursday the shutdown of its I4-1 plant would reduce its olefins production 29,000 tonnes from the current capacity of 1,713,000 tonnes per annum, or by 1.7 per cent.

The previously unplanned shutdown is to repair machinery and prepare all related equipment for full production and to correspond to future feedstock usage, it said.

Tisco said the I4-1 plant had a production capacity of 515,000 tonnes of ethylene per annum and 265,000 tonnes of propylene.

Unplanned shutdowns by other petrochemical plants in the region, such as Mitsubishi Chemical in Japan, Formosa Petrochemical in Taiwan and Chandra Asri in Indonesia, will push up ethylene prices in Asia and prove a positive factor for PTTCH, it added.

Meanwhile, PTTCH's ethylene-naphtha spread has surged 55 per cent since the end of last month, due to weak naphtha prices. In the same period, its propylene and high-density polyethylene spreads rose 30 per cent and 16 per cent, respectively, following unplanned shutdowns of several plants in Asia.

Therefore, earnings in the first quarter will remain strong, said Tisco.

Tisco expects PTTCH to announce record earnings of Bt6 billion to Bt7 billion for the fourth quarter last year due to higher-than-estimated sales volumes.

This is better than the brokerage's previous earnings estimate of Bt5.58 billion.

Although the company's share price has tumbled 25 per cent this year compared with the Stock Exchange of Thailand Index's fall of 15 per cent, Tisco believes the stock might rebound after it announces last year's results on February 22.

The Nation