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Asia Oil & Petrochemicals
Refining margin remains healthy
Refining and petrochemicals update
GRM remains near US$9/bbl. Singapore complex GRM was flat WoW, up by
0.4% to US$8.9/bbl, supported by better middle distillates and fuel oil
spreads. Gasoline spread, however, retreated by 11% WoW, with US data
showing flat demand YoY. QTD, GRM remains healthy at US$8.9/bbl (+77%
YoY, +2.2% QoQ).
Petrochemical spreads were mixed last week but product pricing was
generally better, signaling that downstream demand has started to pick up.
PE spread increased 1-2% WoW, and has risen 5% since early July as
overcapacity was gradually absorbed. While MEG spread was down 21%
WoW, the QTD spread was up 80% QoQ and 197% YoY due to market
expectations that NPC’s capacity will come back soon. ABS spread
rebounded 3% WoW, but QTD the margin retreated 25% QoQ and 37% YoY.
We believe the decline was due to cost pressure from high Butadiene prices
and destocking by buyers in China.
Country-specific developments and views
Taiwan: PE spread strengthened this week as we expected, which supports
our positive view on FPC. As overcapacity is gradually absorbed, we expect
FPC’s HDPE’s cash margins to increase 100% and 30% YoY in 2012-13E.
Meanwhile, Nan Ya Plastic should benefit from the healthy MEG spread. We
believe the upward trend is likely to continue as the destocking in the
polyester supply chain should be close to an end. The weak ABS margins
echo our conservative view on FCFC. Meanwhile, FPCC should benefit from
healthy refining margins. We have Outperform ratings on FPC, NPC and
FPCC, and a Neutral rating on FCFC.
Korea: With Korean oil refiners’ earnings taking off this week, we believe any
weakness in share prices would be a good buying opportunity. While
concerns over further price cuts have weighed on oil refiners' share prices
recently, we believe 2Q11 to be the earnings bottom, and expect to see
sequential earnings growth in 2H11. GS Holdings remains our top pick in the
oil refining space.
Japan: Refining margin in Japan was down slightly by 0.7% WoW. Gasoline
margin was down by -15%, while both kerosene and diesel margins were up
by 7% WoW
Thailand: Earnings and regulatory changes remain in focus. IRPC, PTTAR and
PTTCH will all report their 2Q11 earnings by the end of this week. We consider
potential regulatory changes as manageable to downstream earnings. Our
preferred name remains the upcoming merged entity PTT Global Chemicals
(PTTAR plus PTTCH). On a shorter time frame, we expect earnings optimism to
support IRPC, a stock we upgraded in early July.
Outlook and Strategy
Among Asian stocks, we like GS Holdings, PTTAR, PTTCH, HPCL, FPC and
NPC.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia Oil & Petrochemicals
Refining margin remains healthy
Refining and petrochemicals update
GRM remains near US$9/bbl. Singapore complex GRM was flat WoW, up by
0.4% to US$8.9/bbl, supported by better middle distillates and fuel oil
spreads. Gasoline spread, however, retreated by 11% WoW, with US data
showing flat demand YoY. QTD, GRM remains healthy at US$8.9/bbl (+77%
YoY, +2.2% QoQ).
Petrochemical spreads were mixed last week but product pricing was
generally better, signaling that downstream demand has started to pick up.
PE spread increased 1-2% WoW, and has risen 5% since early July as
overcapacity was gradually absorbed. While MEG spread was down 21%
WoW, the QTD spread was up 80% QoQ and 197% YoY due to market
expectations that NPC’s capacity will come back soon. ABS spread
rebounded 3% WoW, but QTD the margin retreated 25% QoQ and 37% YoY.
We believe the decline was due to cost pressure from high Butadiene prices
and destocking by buyers in China.
Country-specific developments and views
Taiwan: PE spread strengthened this week as we expected, which supports
our positive view on FPC. As overcapacity is gradually absorbed, we expect
FPC’s HDPE’s cash margins to increase 100% and 30% YoY in 2012-13E.
Meanwhile, Nan Ya Plastic should benefit from the healthy MEG spread. We
believe the upward trend is likely to continue as the destocking in the
polyester supply chain should be close to an end. The weak ABS margins
echo our conservative view on FCFC. Meanwhile, FPCC should benefit from
healthy refining margins. We have Outperform ratings on FPC, NPC and
FPCC, and a Neutral rating on FCFC.
Korea: With Korean oil refiners’ earnings taking off this week, we believe any
weakness in share prices would be a good buying opportunity. While
concerns over further price cuts have weighed on oil refiners' share prices
recently, we believe 2Q11 to be the earnings bottom, and expect to see
sequential earnings growth in 2H11. GS Holdings remains our top pick in the
oil refining space.
Japan: Refining margin in Japan was down slightly by 0.7% WoW. Gasoline
margin was down by -15%, while both kerosene and diesel margins were up
by 7% WoW
Thailand: Earnings and regulatory changes remain in focus. IRPC, PTTAR and
PTTCH will all report their 2Q11 earnings by the end of this week. We consider
potential regulatory changes as manageable to downstream earnings. Our
preferred name remains the upcoming merged entity PTT Global Chemicals
(PTTAR plus PTTCH). On a shorter time frame, we expect earnings optimism to
support IRPC, a stock we upgraded in early July.
Outlook and Strategy
Among Asian stocks, we like GS Holdings, PTTAR, PTTCH, HPCL, FPC and
NPC.
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