KUALA LUMPUR (April 30): Analysts are revising upward their forecasts for Lotte Chemical Titan Holding Bhd's (LCT) share price, which is still trading substantially below its initial public offering (IPO) price, and its earnings for the financial year ending Dec 31, 2021 (FY21), following a set of bumper results for the first quarter that were boosted by a sharp rise in product prices.
Shares in LCT climbed to a two-year high this morning amid rising optimism about strong earnings growth in the next two quarters.
The stock jumped as much as 30 sen to RM3.29 in the early session, the highest since May 2019. At the lunch break, it closed at RM3.19, up 20 sen or 6.7%.
Its trading volume swelled to 33.69 million shares, more than four times its 200-day average of 7.23 million shares, making it the 20th most actively traded counter on Bursa Malaysia so far today.
Investors flocked to the counter after the company recorded its best quarterly performance since its listing in July 2017, with net profit of RM440 million on a revenue of RM2.37 billion for the first quarter ended Jan 31, 2021 (1QFY21).
The quarterly result, which represented 99% of the consensus full-year earnings forecast, prompted analysts to revise their earnings forecasts much higher in a “very strong” 2021 for petrochemical prices. Earnings forecasts for FY22 have also been revised upwards, although still expected to normalise vis-a-vis 2021 levels.
CGS-CIMB Research, in its results note, increased its target price (TP) to RM3.95 from RM2.86, its second upward revision since February.
“Based on our calculations for April and May 2021 (but excluding June for now), we believe that LCT will earn a weighted average polymer spread of US$856 (about RM3,513.79)/tonne in 2Q21, which is higher than 1Q21’s US$730/tonne, and substantially higher than LCT’s historic-low spread of US$382/tonne in 1Q20,” it said in the note yesterday.
“Despite this, LCT has conservatively guided for core net profit for 2Q21 to be slightly below the RM440 million achieved for 1Q21, mainly due to a q-o-q (quarter-on-quarter) slowdown in sales volume,” it said.
Meanwhile, TA Research in a note today raised its TP to RM3.60 from RM3.21.
“Polymer prices have skyrocketed since April 2020, and are currently at a seven-year high since 3Q14.
“We believe that high prices will continue to be sustained on the back of:
- robust demand for personal protective equipment (PPE, e.g. face masks and disposable gowns) and plastic packaging; and
- inventory restocking following supply shortages caused by Hurricane Uri in mid-February 2021.
"We tweak our ASPs (average selling price forecasts) for polyolefins and MEG higher to reflect their jumps in 1Q21. Correspondingly, our FY21-23 forecasts are raised by 63%-121%," the research house added.