Mitsui Chemicals (4183) FY17 Q1 Call – Good News for Petrochemicals Al
Key Points
- Mitsui Chemicals revised up its H1 earnings guidance modestly. The company has left its H2 assumptions unchanged for now – except for increasing adjustment costs by ¥1.0bn. The shares managed to finish up 1.26%, but plunged at 13:00 on Aug 2nd when the announcement was made, and failed to recover to the intraday high of ¥652.
- The market reacted positively today, Aug 2nd, to Mitsubishi Gas Chemical’s (4182) announcement, but in contrast did not react very positively, at least immediately, to what were arguably good announcements by Sumitomo Chemical (4005), Mitsubishi Chemical Holdings (4188), and Ube Industries (4208). Tosoh’s (4042) shares plummeted on August 1st, implying that the market had higher expectations. It appears that the good petrochemical earnings achieved in Q1 were largely discounted during July, when petrochemical shares performed relatively well.
- Mitsui Chemicals originally assumed an OP decline in FY17 because of higher plant maintenance costs, estimated to be around ¥4.0bn in Q2. Higher than expected volumes and better spreads in Basic Chemicals have improved the overall picture.
- Mitsui Chemicals changed its EPS and dividend guidance because of a reverse stock split planned for October, which is in accordance with TSE policies. Fundamentally this represents no real change. We were already estimating FY17 OP of ¥102.7bn, which implies a PER of 9.6x and EV/OP of 9.8x. Quarterly trends and revised guidance are illustrated below.
Mitsui Chemical is the parent company of a group engaged in the manufacture and sale of petrochemicals, basic chemicals, urethane, functional polymeric materials, functional chemicals and engineered materials. Co.'s principal products include optical lens materials, medical materials, catalysts, chemical products, agricultural products such as agricultural insecticide, fungicide, soil fumigation disinfectant, ant-repellent and disease prevention agents for use in living environments, as well as petrochemical raw materials, phenols, synthetic fiber raw materials, PET resin, industrial chemicals, polyethylene and polypropylene.
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