Lotte is top pick in petrochemicals sector, says Maybank IB

KUALA LUMPUR: Petronas Chemicals Bhd and Lotte Chemical Titan Holding Bhd's (LCT) Q3FY17 results will be in line with market expectations with an upward bias, according to Maybank Investment Bank Research.

The research firm issued Buy calls on both counters with LCT being the top pick on cheaper valuations.

"Key point is both managed to turnaround their facilities within stipulated plan and ASPs have crept up higher due to the global production disruption," it said in its morning note.

It added that it is positive on the petrochemicals sector on favourable supply-demand dynamics and undemanding valuations.

Petronas Chemicals had a major turnaround for its Ammonia and Kertih plants in Q3FY17, while LCT's Naphtha Cracker #1 underwent a turnaround in the same quarter, the research firm noted. 

On its outlook for the sector, Maybank IB Research said petrochemical prices had received a boost from Tropical Storm Harvey in the US Gulf. 

"Many of the US petrochemical facilities were damaged and are not yet fully operational till today. This had disrupted petrochemical supply and lifted prices higher. 

"In addition, global PMI has been in strong growth territory in 2017 which underpins a sturdy demand for petrochemical products," it said.