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Petrochemicals

Petrochemicals

Petrochemicals



- Higher feedstock cost raises ethylene price WoW. Ethylene price rose 1.7%

WoW, driven by higher feedstock cost while PE prices were steady WoW. An

industry source reports purchase interest in China in spot markets as buyers begin

to replenish depleted stocks. Still, the positive for SE Asia was small. Regional

plant shutdowns (Sinopec plants in China with combined HDPE capacity of

~500ktpa) will reduce supply and this will be key for PE price for some weeks.

- PX price up as more PTA plants back up. Demand for PX edged up after

regional PTA plants started back up after maintenance shutdowns. This led PX

price up 0.4% WoW to US$1,223/t but did not overturn the downward trend of PX

price as QTD average is down 5.2% QoQ. Overall margin for aromatics producers

was offset by higher BZ price (+2% WoW) on stronger demand in the west.

- Lower PET and PTA prices narrowed integrated spread. Integrated PET/PTA

spread fell 3.2% WoW to US$289/t as PET and PTA prices declined 0.6-0.8% WoW

due to weak regional buying sentiment and poor polyester demand trend. Further,

several PTA plants have resumed operations after maintenance shutdowns in late

March. Price of PET bottle grade resin prices were steady in Asia.

- Investment view: The Petrochemical sector index was stable WoW, outperforming

the SET (-0.2% WoW) on a quiet week ahead of the long Songkran weekend. We

expect to see share price for companies in the sector ease this week on lower product

spread and light trade as investors will stay on the sidelines in the holiday. We stick

with PTTGC (BUY, TP: Bt92) as our top pick since expected weak 1Q14 earnings should

be largely priced in. The valuation at 8x P/E is undemanding vs. >15x for regional peers.


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