EARLIER this month, Lotte Chemical Titan Holdings Bhd (LC Titan) emerged from “a deep slumber” with retail investors expecting to cash in on its position as a beneficiary of strong demands for polypropylene (raw material for mask) and butadiene (one of the raw materials for gloves).
Recall that the share price of LC Titan has never come close to its initial public offering price of RM6.50 since its listing on July 11, 2017.
But high hopes were dented when the petrochemical giant posted a below par 3Q FY2020 results with net profit shrinking to RM78.77 mil (3Q FY2019: RM91.35 mil) which eventually summed up to a mere RM4.25 mil for 9M FY2020 (9M FY 2019: RM252.2 mil).
Nevertheless, Maybank IB Research saw LC Titan as having achieved “outperformance due to higher-than-expected product spread” from a standpoint of the research house’s 3Q FY2020 core net profit of RM108 mill (-28% quarter-on-quarter; +18% year-on-year) which brought the company’s 9M FY2020 core net profit to RM37 mil (-85% yoy) and made up 137%/191% of its and street’s full-year forecasts.
Moving forward, Maybank IB Research expects LC Titan to post a sequentially stronger 4Q FY2020 earnings, hence raising the company’s FY 2020E net profit to RM177 mil (+RM150 mil) while increasing the company’s average selling price by 3%.
“Though spread may remain firmed in November-December, we think it could soften in 2021 on new supply from Malaysia’s RAPID (Refinery and Petrochemical Integrated Development) as well as China,” projected analyst Lee Yen Ling in a results review.
All-in, the research house maintained its “hold” rating on LC Titan as well as the company’s target price at RM2.10.
CGS-CIMB Research, too, remains cautious of LC Titan’s performance despite an anticipated stronger second half stemming from strong Chinese peak season demand for plastics and supply disruptions from the U.S. hurricane season (especially for its 4Q FY2020F).
“While we lift forecasts and raise our target price to RM1.21 (from 97 sen previously), we reiterate ‘reduce’ due to the likely industry overcapacity in FY2021F,” added the research house.
At 10.45am, LC Titan was down three sen or 1.41% at RM2.10 with 6.21 million shares traded, thus giving the company a market capitalisation of RM4.85 bil. – Oct 30, 2020
