TPC gains as orders rise, margins set to peak

"The PVC spread is expected to widen to near-record levels this year, " it said in a report. TPC has a combined production capacity of 858,000 tonnes per annum and is benefiting from the buoyant demand from the construction sectors in China, India and the Middle East.

TPC has plants in Thailand, Vietnam and Indonesia.

Apart from core PVC production, TPC has also invested in PVC-related industries such as PVC emulsion, pipe and pipe-fitting, construction materials made from PVC such as doors and window frames, and PVC compounds.

Tisco expects the company's PVC spread to increase by 20 per cent to US$399 (Bt12,600) per tonne this year, just short of its previous peak of $400 in 2004.

The wider PVC spread should allow TPC to record a 33-per-cent jump in normalised earnings to Bt2.97 billion this year.

Although the PVC spread may soften in 2009 and 2010, it is expected to remain above $350 per tonne.

"Moreover, TPC's capacity expansion next year should help normalised profit rise 8 per cent on year to Bt3.21 billion," Tisco added.

Tisco expects TPC to also gain from capacity expansion of 16 per cent year on year to 858,000 tonnes in 2009.

It plans a further increase of 4 per cent in 2009 that should result in its PVC capacity reaching 894,000 tonnes.

TPC could also post a potential earnings upside from a joint-venture petrochemical project in Vietnam, which is expected to begin commercial operations in 2011.

TPC recently agreed to join Vina SCG Chemical Company (Thailand) and Vietnamese partners to invest in a large petrochemical complex in Vietnam.

At Wednesday's closing price of Bt23.80 on the Thai bourse, it should offer a 16-per-cent upside to Tisco's target price of Bt27.60.