|Summary:||Petrochemical: FCFC (1326 TT), FPC (1301 TT) our are top FPG picks
Group Profile: Formosa Plastics Group (FPG) is engaged in oil refining; petrochemicals; plastic raw materials; secondary processing of plastics, fiber and textiles; electronic materials; machinery; transportation; and other related businesses. Its four core units are Formosa Plastics Corporation (1301 TT, FPC), Nan Ya Plastics Corporation (1303 TT, NPC), Formosa Chemicals & Fibre Corporation (1326 TT, FCFC), and Formosa Petrochemical Corporation (6505 TT, FPCC).
FPG core members?FEB sales topped expectation thanks largely to higher product prices: Although sales volume partially eased in FEB, sustained product price strength underpinned overall performances. However, we have seen more fence sitting recently as inventories have increased in China and some petrochemical product prices have pulled back post Chinese New Year. Nonetheless, with support from plant turnarounds and the arrival petrochemical industry peak season, we remain positive on the petrochemical sector’s outlook. Eyeing the SM and PVC strength in 1H17, we retain our Buy ratings on the following:
FPC (1301 TT): Buy with TP at NT$102 (2.1x 2017 P/B, 15% upside)
FCFC (1326 TT): Buy with TP at NT$113 (2.1x 2017 P/B, 22% upside)