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IRPC

2015: big turning point BUY

IRPC Plc



We revise down IRPC’s FY2014 fair value and earnings forecast to

reflect lower-than-expected 1H14 earnings result. However, the

share price has already dropped and showed limited upside. We

recommend waiting for IRPC’s profitable turning point in 2015.

- Value added in long run from new investment plans

According to the analyst meeting on August 14, after completing UHV

project in April 2015, IRPC has planned to launch new investment projects

to add value with excess propylene products from UHV project by producing

polypropylene products with considerably higher spread. The projects are

worth of US$220m, expected to be completed in late-2016. We have not

included the new projects in our earnings forecast yet since they have to

wait for approval from the Board of Directors in late-2015.

- Revise down FY2014 earnings forecast

We revise down FY2014 earnings forecast to reflect lower-than-expected

1H14 earnings result. 1H14 net profit made up 39.5% of the new FY2014

earnings forecast. 2H14 earnings are expected to improve from 1H14

thanks to significantly better benefit from Delta program (compared to

1H14) and profit from hedging and land sales. IRPC’s net profit is estimated

to grow by 60%yoy in 2014 and jump by 207%yoy in 2015 after the UHV

project is completed; the project would increase GIM (gross integrated

margin) by at least US$2-3/barrel.

- New fair value is B3.80. Reiterate BUY

Under the new forecast, we revise down FY2014 fair value from B4.07 to

B3.80, reiterating BUY. The share price have substantially absorbed the

negative factors already. IRPC’s profit growth will be strong in a long run

thanks to ongoing and new investment projects.


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