Equity Research Company Update Chandra Asri Petrochemical Tbk

Transcription

1 Jan00 Aug16 Sep16 Oct16 Nov16 Nov16 Dec16 Jan17 Feb17 Mar17 Mar17 Apr17 May17 Jun17 Jun17 Jul17 Aug17 Sep17 Oct17 Oct17 Nov17 Dec17 Jan18 Feb18 Mar18 Equity Research Company Update Chandra Asri Petrochemical Tbk InLine with our Forecast; No NearTerm Growth Catalysts; Downgrade to HOLD Revenue growth of 25% yy supported by robust sales volume, higher utilization rates and stronger ASPs; modest net profit growth of 6% yy on the back of higher raw material costs CAP booked FY17 revenue of USD 2.4Bn (+25% yy) supported by robust sales volume (2,137 KT vs. 1,908 KT), which was driven by higher utilization rates. As per the company s latest presentation, utilization rates for its plants ranged from 94% to 117%. Additionally, the recovery in Brent price meant that the company experienced stronger ASPs for most of their products. However, CAP s largest COGS component, raw materials (naphtha, accounting for 80% of total raw material cost), increased by 38% yy. As such, net profit achieved a minor growth of 6% yy. Negative growth in 4Q17 on a quarterly basis due to recovery in Brent oil While CAP started 2017 on a positive note (starting with USD 56/bbl before dropping to a low point of USD 44/bbl), margins were suppressed on a quarterly basis, as Brent prices picked up by 4Q17. Brent prices in the fourth quarter averaged USD 61/bbl, vs. USD 52/bbl in the third quarter of last year. Consequently, the price of naphtha grew from USD 570/MT in 4Q17 compared to USD 468/MT in 3Q17. Stagnant net profit growth going forward until realization of capex; downgrade to HOLD CAP s FY17 results were inline with our forecasts (click here for our initiation report), however, on the basis of lower forecasted EBITDA and earnings, we feel that the company s valuation has peaked, and thus we downgrade our rating to HOLD at TP of IDR 5,720/share, implying 2018F PER of 21.86x and EV/EVITDA of 13.00x. Going forward, we expect CAP to have single digit net profit growth of 8% in 2018F and 3% in 2019F, before achieving 11% growth in 2020F, as there are no solid nearterm catalysts until the capex can be translated into revenue. We project CAP to have double digit revenue growth (19%) only in 2020F, driven by the completions of the polyethylene, polypropylene segments, the naphtha cracker furnace revamp, and the new MTBE and Butene1 plant. Post these expansions, CAP s next major revenue driver would be from their second petrochemical complex, which is estimated to be completed by ,250 6,250 5,250 4,250 3,250 2,250 1,250 HOLD Current Price IDR 5,900 Price Target IDR 5,720 Upside/Downside 3% 23 INDONESIA ENERGY CHEMICALS Stock Data Bloomberg Ticker TPIA IJ Equity Outs. Share (Mn) 17, Mkt Cap (IDR Bn) 105, Week Range (IDR) 4, M Avg. Val (IDR Bn) YTD Returns (%) 1.7 Beta (x) 0.71 Free Float (%) Share Price Performance (IDR/Share) Upside risks include: higher ASPs, lower naphtha prices, and greater sales volume. Downside risks include: bullish naphtha prices, delays in capex, and oversupply of petrochemicals in the market. FINANCIAL HIGHLIGHTS (USD millions) F 2019F Sales Revenue 1,378 1,930 2,419 2,625 2,687 EBITDA Net Profit EPS (USD) EPS Growth (%) 44.4% % 6.2% 7.7% 3.4% PER (x) PBV (x) EV/EBITDA (x) NetDER (%) 50.8% 11.1% 12.7% 3.8% 6.1% ROE (%) 3.0% 29.6% 22.7% 19.4% 17.9% Source: CAP, Sucor Sekuritas (Share price as of March 22nd 2018) Share Performance (%) Month Absolute Relative 3M M M AKSHAY RAYAN SUGANDI akshay.sugandi@sucorsekuritas.com

2 FY17 Results Update Fig 1 25% yy Revenue Growth Fig 2 12% Increase in Sales Volume USD Mn USD Mn/KT KT KT 3,000 2,500 2,000 1,500 1, ,000 3,000 2,000 1, ,000 2,000 1,000 Revenue Overall ASP (RHS) Production Capacity Sales Volume (RHS) Fig 3 Greater Plant Utilization Rates 120% 100% 99% 95% 94% 105% 117% 80% 60% 40% 20% 0% Naphtha Cracker Polyethylene Plant Polypropylene Plant Styrene Monomer Plant Butadiene Plant

3 Fig 4 Modest Net Profit Growth of 6% yy vs. Higher Raw Materials Costs (37% yy) USD Mn USD Mn 1,500 1,250 1, Net Profit Raw Materials (RHS) Fig 5 Earnings Suppressed on a Quarterly Basis 3Q17 4Q17 % QoQ FY16 FY17 % YoY Sucor % to Sucor 17F 17F Revenue % 1,930 2,419 25% 2, % Gross Profit % % % EBIT % % % PBT % % % Net Profit % % % ; Note: Values in USD Mn Fig 6 Brent Oil Price 2016 vs Fig 7 Increase in Brent Oil (4Q17) USD/bbl USD/bbl Q17 2Q17 3Q17 4Q17 Source: Bloomberg, Sucor Research Source: Bloomberg, Sucor Research 3

4 Stagnant net profit growth going forward until realization of capex; downgrade to HOLD Fig 8 Net Profit Forecasts vs. Capex USD Mn F 2019F 2020F Net Profit Capex Net Profit Growth (RHS) 12% 10% 8% 6% 4% 2% 0% Looking at the figure above, we project CAP to have minimal net profit growth of 8% in 2018F and 3% 2019F, as there are no nearterm catalysts until the capex can be translated into revenue. We project CAP to have double digit revenue growth of 19% (and hence 11% net profit growth) only in 2020F due to the completions of the polyethylene, polypropylene segments, the naphtha cracker furnace revamp, and the new MTBE and Butene1 plant. Fig 9 Update of CAP Expansion Plans Plant Stage Expected Startup Date Project Cost (USD Mn) Capacity Increase (KTA) Funding Structure Butadiene Expansion Committed 2Q % Internal Cash New Polyethylene Plant Committed 4Q Debt + Equity Naphtha Cracker Furnace Revamp Committed 1Q (Ethylene) + 20 (Propylene) 100% Internal Cash Polypropylene Debottlenecking Pipeline 3Q % Internal Cash MTBE and Butene1 Pipeline 3Q (MTBE) + 43 (Butene1) 100% Internal Cash Total Second Petrochemical Complex Feasibility 1Q24* 4,0005,000 1,000 TBD * Estimation (Management suggested that second petrochemical complex could be completed by the beginning of 2024 or at max 2025) Note: The naphtha cracker furnace revamp is likely to provide benefits towards Pygas and Mixed C4 by increasing their capacity by 15 KTA each 4

5 That said, we downgrade our rating to HOLD, with a TP of IDR 5,720/share, implying 2018F PER of 21.86x and EV/EBITDA of 13.00x. Fig 10 EV/EBITDA Valuation (2018) Bear Case Target Bull Case EBITDA Multiple EV 5,719 7,345 8,578 Subtract: Net Debt (Cash) (71) (71) (71) Equity Value 5,790 7,505 8,649 No. of Shares (Mn) 17, , , Price (USD/share) Price (IDR/share) 4,420 5,720 6,600 Upside/Downside 25% 3% 12% Source: CAP, Sucor Estimates Note : Values in USD Mn except for per share items Fig 11 Income Statement and Cash Flow Statement Income Statement Note: All figures in USD Mn unless noted otherwise F 2019F F 2019F Net Revenue 1,378 1,930 2,419 2,625 2,687 Net Profit Cost of Sales (1,232) (1,436) (1,874) (2,058) (2,099) Depreciation & Amortization Gross P rofit NonControlling Interest (0) 0 1 Operating Expenses (67) (71) (81) (94) (99) Changes in Net Working Capital (14) 60 (74) Selling Expenses (42) (43) (42) (47) (49) Cash Flow from Operations General and Administrative Expenses (25) (28) (38) (47) (51) Capex (227) (84) (210) (567) (536) EB IT Others (24) 18 9 (43) 7 Other Operating Expenses (23) (23) (40) (15) (15) Cash Flow from Investing (252) (66) (201) (610) (529) Finance Costs (23) (32) (36) (31) (32) Changes in Debt 57 (123) 206 (42) 57 Gain (Loss) on Derivative Financial Instruments (2) 1 (1) 1 1 Equity Issuance 371 Share in Net Loss of an Associate (4) (6) (9) 1 1 Dividends Paid (5) (43) (161) (137) (142) Gain (Loss) on Foreign Exchange Net (12) (1) (3) 1 1 Others 13 (1) 4 78 (20) Other Gains (Losses) Net Cash Flow from Financing 65 (167) 421 (101) (105) Depreciation & Amortization Net Cash Flow (111) (183) (141) EB IT D A Beginning Balance P BT Ending Balance Income Tax Expense Net (30) (100) (105) (114) (118) Net P rofit Cash Flow Statement 5

6 Fig 12 Balance Sheet and Key Ratios Balance Sheet Key Ratios F 2019F F 2019F Cash and Cash Equivalents M argins Receivables Gross Margin (%) 11% 26% 23% 22% 22% Inventories Net EBIT Margin (%) 6% 22% 19% 18% 18% Others EBITDA Margin (%) 10% 26% 22% 22% 22% Current Assets ,429 1,172 1,041 Net Margin (%) 2% 16% 13% 13% 13% Fixed Assets Net 1,308 1,317 1,448 1,916 2,336 Other LT Assets Valuatio ns Non Current Assets 1,446 1,437 1,558 2,069 2,483 P/E (x) Total Assets 1,862 2,129 2,987 3,242 3,525 P/BV (x) Current M aturities Net Note: All figures in millions of USD unless noted otherwise EV/EBITDA (x) Loans Gearing/ Liquidity Payables Interest Coverage (x) Others Net Debt/Equity (x) (0.13) (0.04) 0.06 Current Liabilities Net Debt/Total Cap. (x) (0.09) (0.03) 0.05 LT Liabilities Net Current Ratio (x) Other LT Liabilities CFO/Net Income (x) Non Current Liabilities Total Liabilities ,318 1,363 1,432 P rofitability ROAA (%) 1% 15% 12% 11% 10% Capital Stock ROAE (%) 3% 30% 23% 19% 18% Additional PaidIn Capital ROCE (%) 6% 27% 20% 19% 18% Retained Earnings ,033 1,246 Earnings Yld. (%) N/A N/A 4% 5% 5% Others Dividend Yield (%) N/A N/A 2% 2% 2% Total Equity 887 1,142 1,669 1,879 2,092 Total Liabilities and Equity 1,862 2,129 2,987 3,242 3,525 6

7 Chandra Asri Petrochemical: Result Update Sucor Sekuritas rating definition, analysts certification, and important disclosure Ratings for Sectors Overweight Neutral Underweight : We expect the industry to perform better than the primary market index (JCI) over the next 12 months. : We expect the industry to perform in line with the primary market index (JCI) over the next 12 months. : We expect the industry to undeidrerform the primary market index (JCI) over the next 12 months Ratings for Stocks Buy Hold Sell : We expect this stock to give return (excluding dividend) of above 10% over the next 12 months. : We expect this stock to give return of between 10% and 10% over the next 12 months. : We expect this stock to give return of 10% or lower over the next 12 months Analyst Certification The research analyst(s) primarily responsible for the preparation of this research report hereby certify that all of the views expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers. The research analyst(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. Disclaimers This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. PT Sucor Sekuritas accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. PT Sucor Sekuritas and its directors, officials and/or employees may have positions in, and may affect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. PT Sucor Sekuritas may also seek investment banking business with companies covered in its research reports. As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 7

8 Chandra Asri Petrochemical: Result Update Sales Office & Research PT. Sucor Sekuritas HEAD OFFICE PT. Sucor Sekuritas Sahid Sudirman Center 12th Floor Jl. Jend Sudirman Kav. 86 Jakarta Indonesia Ph : (+6221) Fax : (+6221) JAKARTA Ruko Inkopal Block A No. 23 A Jl. Boulevard Barat Raya Jakarta Utara Ph: (+6221) Fax: (+6221) GALERI INVESTASI Universitas Tarumanegara Fakultas Ekonomi Lab. Pasar Modal Ged. A Lt. 7 Jl. Tanung Duren Raya No. 1, Jakarta Barat TANGERANG GALERI INVESTASI Swiss German University Edu Town BSD City Fakultas Business Administration & Humanity Tangerang BANDUNG JL.Hegarmanah No.57 Bandung Ph: (+6222) Fax: (+6222) MALANG Jl. Jaksa Agung Suprapto No.40 Kav. B4, Malang Ph: (+62341) Fax: (+62341) SURABAYA Gd. Spazio Lt. 2 Unit 208 Jl. Mayjen Yono Soewoyo Kav. 3 GRAHA Famili Surabaya Ph: (+6231) Jl. Slamet no. 37 Surabaya Ph : (+6231) Fax : (+6231) Ruko Pakuwon Town Square AA250 Jl. Kejawen Putih Mutiara, Surabaya Ph: (+6231) Fax: (+6231) Fax: (+6231) GALERI INVESTASI Universitas Negeri Surabaya PIC: Wahyudi Maksum Kampus Ketintang Gedung Business Centre, Fakultas Ekonomi Jl. Ketintang, Surabaya Ph: (+6231) Research 1. Achmad Syafriel Head of Research achmad.syafriel@sucorsekuritas.com 2. Putri Tobing, CFA Senior equity analyst putri.tobing@sucorsekuritas.com 3. Luthfi Ridho Lead Economist luthfi.ridho@sucorsekuritas.com 4. Marsya Candradewi Economist marsya.candradewi@sucorsekuritas.com 5. Elbert Setiadharma Equity Analyst elbert.setiadharma@sucorsekuritas.com 6. Akshay Sugandi Equity Analyst akshay.sugandi@sucorsekuritas.com 7. Posmarito Pakpahan Equity Analyst posmarito.pakpahan@sucorsekuritas.com 8. Raditya Immanzah Ontheground analyst raditya.immanzah@sucorsekuritas.com 9. Sandy Ham Ontheground analyst sandy.ham@sucorsekuritas.com 10. Shirley Saroinsong 11. Rian Yuntoharjo Editor & translator Research assistant shirley.saroinsong@sucorsekuritas.com rian.yuntoharjo@sucorsekuritas.com 8