BMA Today for September 23, 2019 
 
     MONDAY 23 September 2019 
 
 

 

   

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At a Glance

Previous Market Session

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In Focus
Petrochemicals: Movement in feedstock rates shuffles margins

   Primary margins for the petrochemical chain were noted on a downward trajectory (barring PSF) compared to the previous week. Latest quotes reveal core delta of PolyVinyl Chloride (PVC) has settled 5% WoW lower to USD455/ton.Ethylene prices reportedly climbed during the week to USD830/ton, up 4% WoW, amid constrained product availability and uplift in buying. PVC prices were noted at USD870/ton, down 1% WoW. The development remains neutral for Engro Polymer and Chemicals Pakistan Ltd (EPCL). The QTD margins have averaged at USD481/ton, up 13% QoQ, and current margins remain above the long term average delta. Purified Terephthalic Acid (PTA) - Paraxylene (PX) margin for the week trimmed 8% WoW to USD143/ton despite uptick in PTA rates by 1% WoW to USD665/ton. PX prices rose USD25/ton to settle at USD785/ton, up 3% WoW. With margins retracing from their YTD highs, we see current margins to be a neutral development as they continue to trade over and above our base case margins of USD140/ton and long term average of USD115/ton. Polyester Staple Fibre (PSF) margins shored up 13% WoW to USD325/ton. Higher feedstock rates were recorded for the week with Mono-Ethylene Glycol (MEG) prices were seen rebounding to USD615/ton, a rise of USD50/ton or 9% WoW while PTA rose 1% WoW. However, favourable uptick in PSF prices during the week to USD1,112/ton, or 6% WoW, helped drive the margins. We reiterate our buy rating on EPCL and LOTCHEM trading at a forward P/E of 6.3x and 5.4x, respectively.

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Media Watch

Sectoral: Banks advances drop in July / Dawn
Sectoral: Textile exports post 2.30pc growth reach USD2.215 billion in two month / Business Recorder
Economy: Petroleum imports shrink 26pc / Dawn
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DISCLAIMER
This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time. This memorandum is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned.