Analyst Research Report Snapshot


Formosa Plastics (1301 TT, NT$79.0, N): Maintain Neutral




KGI Greater China


25 Oct 2013





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3Q13 earnings rebound on non-core contribution We revise down 3Q13F earnings 10.5% to NT$0.99, 4.3% below consensus due to weaker-than-expected PVC spread; main earnings contributors FPC (US) & FPCC accounted for 67% of 3Q13 earnings We expect upcoming PVC low season PVC will hurt FPC’s core business in 4Q13; we are also negative on integrated-PVC producers in 2014 as we expect caustic soda to remain weak on ailing pulp & alumina business; we lower 2014F operating profit 20.7% Shares are trading at PB of 2.0x, in the middle of their historical band of 0.9-2.9x; with fewer catalysts for the core business, we maintain our 12M target price of NT$77, on 2.0x 2014F average BVPS of NT$38.7; maintain Neutral Shares are trading at a PB of 2x, in the middle of their historical band of 0.9-2.9x. We maintain our 12-month target price at NT$77, based on 2x 2014F BVPS of NT$38.7. However, we think China PVC demand will be sluggish and that caustic soda will continue to hurt the core business. We reiterate our Neutral rating on FPC.

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