Title China General Plastics (1305 TT) Buy, TP: NT$41
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Title:China General Plastics (1305 TT) Buy, TP: NT$41
Download File:1305 TT CGPC long report 180201--sinopac.pdf 
Summary:Raise TP to NT$41 (2.3x 2018F P/B) from NT$38 (2.1x 2018F P/B): 1) PVC prices in China gained traction owing to reduced calcium carbide process PVC supplies amid China¡¦s crackdown on polluting industries in 4Q17; 2) PVC demand is improving in 2018 after a disappointing 2017, 3) PVC spread will benefit from low feedstock Ethylene Dichloride (EDC) prices plus rising PVC prices, and 4) Valuation: 1.9x 2018F P/B now vs. historical band of 0.75-2.1x. Eyeing the healthy supply-demand outlook this year, CGPC is likely to see YoY earnings growth 2018. We hence lift our target multiple to 2.3x P/B and our TP by ~8% to NT$41.
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