Net profit of Bt1.5bn beat market estimates, turning around from a huge Bt23bn loss in 2Q24 when it booked impairment charges and expenses related to asset optimization. Excluding inventory loss of US$38mn and other non-recurring items, adjusted net profit surged 145% QoQ to Bt3bn on higher profit contribution from the combined PET and intermediate and fiber segments, while profit from the surfactant segment under Indovinya remained solid (+4% QoQ). 9M24 earnings are Bt20.4bn in the red, hit by impairment charges.
Research
IVL – 3Q24: Net profit beats market estimates
We expect it to deliver more profit in 4Q24 on cost savings, especially in the fiber segment, while PET and surfactant businesses are normally in low season in 4Q. We maintain our 2024F forecast, which already includes the impairment charge, and stay Neutral with TP (2025) of Bt26, based on 1x PBV (2025F) or -1SD.
CPET&IC1/ margin up QoQ. Adjusted EBITDA improved 32% YoY and 15% QoQ to US$427mn as contribution from the CPET&IC segment (67% of total adjusted EBITDA) rose 27% YoY and 23% QoQ on a strengthening in adj EBITDA/t to US$103.4/t (+22% YoY and +27% QoQ). Integrated PET product spread rose QoQ on lower feedstock cost, PX and PTA, and higher demand in North America and Brazil. High freight cost also widened product spread in EMEA market, above Asian markets. The segment also benefited from fixed cost savings of US$17mn from asset optimization.
Profit of surfactant segment remained solid. Indovinya’s adj EBITDA (surfactant segment), which accounted for 24% of total adj. EBITDA in 3Q24, rose 93% YoY and 4% QoQ on recovery of crop solutions and coating and construction segments. Adj. EBITDA/t slid 4% QoQ to US$294/t, though shot up 76% YoY, displaying a superior margin vs. US$103/t for IVL’s combined adj EBITDA/t in 3Q24. Sales volume rose 10% YoY but eased 3% QoQ.
Fiber segment improved QoQ. Adj EBITDA for the fiber segment improved 44% YoY and 22% QoQ, driven by the lifestyle segment. This reflects improved product spread in the lifestyle segment and higher volume in mobility and hygiene. Reduced fixed costs across market segments further boosted the segment’s overall adj EBITDA/t (+49% YoY and +21% QoQ). The segment’s adjusted EBITDA contributed 11% of the total.
More profit in 4Q24. We expect IVL to deliver more profit in 4Q24, backed by better product spread in the lifestyle fiber segment and the fixed cost savings from the plant closures. It already gained US$19mn from fixed cost savings in 3Q24 from the asset optimization and this is expected to grow to US$30mn in 4Q24. The combined PET segment is set to benefit from cost savings and better product spread in 4Q24, although demand will soften during off-peak season. Demand for Indovinya’s crop solutions products will ease, reflecting low farming season in 4Q. Product spread will continue to edge up as industry destocking has ended.
Earnings and TP maintained. Our forecast of a net loss of Bt18.3bn already includes the huge impairment charge caused by asset optimization. 9M24 net loss of Bt20.4bn implies 4Q24 profit of Bt2.1bn, which we see as achievable and we leave our projection unchanged. PBV-based TP stays at Bt26, pegged to 1x PBV (2025F) or -1SD of 5-yr avg.
Risk factors: 1) Weaker demand, 2) less efficiency improvement at new assets than expected and 3) changes in regulations on plastic products. Key ESG risk factors include the environmental impact of its business and how it adapts during the transition to clean energy and a circular economy.