Formosa Plastics EPS may reach NTD1 due to PVC inventory replenishment

Formosa Plastics’ (1301-TW) 1Q19 revenue may lower than 4Q18’s. However, catalyzed by PVC inventory replenishment, its 1Q19 earnings may be bolstered accordingly. Additionally, non-operating investment gain in the US can be expected. Therefore, institutional investors estimate that Formosa Plastics’ 1Q19 EPS may reach NTD1.04.

Formosa Plastics'1Q18~3Q18 performance was outstanding. However, its 4Q18 earnings dropped dramatically due to the followings: a) the decline of international oil prices due to US-China trade war and the weaken of petrochemical products price, b) sharply decline of Formosa Plastics' US revenue recognition, c) the recognition of NTD1.13bn loss from Formosa Petrochemical. Formosa Plastics' 4Q18 net profit was NTD2.28bn (-87.4% QoQ) with EPS of NTD0.36.

It is expected that Formosa Plastics' 1Q19 revenue may drop QoQ due to the followings: a) 6 factories conducted annual maintenance in 1Q19 and the capacity utilization rate was 90%, slightly lower than the previous quarter of 92%, b) the number of shipping days reduced due to Lunar New Year, c) its 1Q19 average product price dropped compare to 4Q18’s.