Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia oil and petrochemicals
Refining margin firmed up
Last week, Asian oil refining margins firmed up to US$7.2/bbl, driven by
strong crude oil price. Meanwhile, petrochemical margins were generally
down due to higher naphtha price.
Asian refining margins climbed to US$7.2/bbl, up 3.1% WoW or 23% QoQ,
driven by strong crude oil price. Dubai crude price average to US$90.67/bbl,
the highest level in two years on constructive inventory data. US DoE data
reported crude stock was down by 4m barrel last week. Gasoline and middle
distillate were the key supporters of the GRM, with spreads up 1–3% WoW.
Demand for these downstream products also appeared strong, as Singapore
inventory data showed light distillate and middle distillate stock were down to
9.3m and 12.3m barrels, respectively, last week.
Petrochemical spreads were mostly down, due to higher naphtha price.
SM and MEG were the few bright spots with 2–6% WoW price and 4–29%
WoW margin increase. In our view, higher Benzene price and downstream
SBR/ABS demand should be the reasons behind SM’s strength. Meanwhile,
the MEG margin increase signals demand from polyester continues to be
strong, as MEG is a critical feedstock for polyester.
Taiwan: We believe FPCC’s (6505 TT) fundamentals will continue to benefit
from the robust refining margin. Also, its olefin business should gain from the
strong ethylene price. However, it remains one of the most expensive refiners
in the region (3.6x 2011 P/B vs peer average of 1.7x). We prefer the three
sister companies who can benefit from the same refining fundamentals
through their respective ~25% holdings in FPCC. NPC continues to be our top
pick with strong polyester demand for its MEG products. We also like FCFC
for its PTA/PX business and FPC for its specialty chemical and EVA
businesses. We still like polyester supply chain related names, like Nan Ya
Plastics and FCFC.
Thailand: Thai downstream names were sold off last week. General profit
taking and concerns about the implementation of LPG price reform were likely
drivers. Following a very strong share price performance over the last six
months, investors will likely be weighing upcoming positive 4Q09 results,
conclusion of LPG price reform and underlying sector fundamentals.
Notwithstanding today's pull back, we continue to favour inexpensive
laggards, namely PTT and Esso Thailand.
India: In the upcoming 3QFY11 results, we expect RIL to post flat earnings
QoQ despite a temporary 10% cut in KG D6 production and a three week
maintenance shutdown of 1/4th the refinery capacity, because of strong GRM
estimates of ~US$9/bbl on the back of increase in distillate cracks and
widening Light-Heavy spreads. The Oil Marketing Companies (OMCs – IOCL,
BPCL, HPCL) are also expected also show an improvement in refining
margins due to crude inventory gains, due to the run up in oil prices.