WLK - Embedded Expectations Analysis - 2021 02 26
The Westlake Chemical Corporation (WLK:USA) currently trades at a recent high relative to UAFRS-based (Uniform) earnings, with a 30.0x Uniform P/E. At these levels, the market has expectations for profitability to remain stable, but management may be concerned about sales volume growth for Olefins and Vinyls, the recovery of caustic soda demand, and their idle facilitiesSpecifically, management may lack confidence in their ability to maintain sales volume growth in Olefins and Vinyls, expand their styrene business, and leverage tunneling methodologies to reduce the need to replace underground pipes through digging. In addition, they may have concerns about the sustainability of polyethylene demand and negative caustic soda demand and pricing dynamics. Furthermore, management may be exaggerating the pace of the rebound in the construction and repair side of their business, and they may be downplaying concerns about projected declines in ethylene exports to China
Westlake Chemical operates as a manufacturer and marketer of basic chemicals, vinyls, polymers and building products. The company operates in two operating segments: Olefins, which manufactures and markets polyethylene, styrene monomer and various ethylene co-products; and Vinyls, which manufactures and markets polyvinyl chloride (PVC), vinyl chloride monomer, ethylene dichloride, chlor-alkali (chlorine and caustic soda), chlorinated derivative products and ethylene, as well as manufactures and sells building products fabricated from PVC, including residential siding, trim and mouldings, pipe and fittings for various water, sewer and industrial applications, and profiles for windows and doors.
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