Halfway into the earnings upcycle
​Reiterate BUY: After a strong 3Q16 beat, we expect more upside for the consensus earnings forecast and remain positive on FCFC due to 1) its solid earnings outlook in 4Q16/2017F; 2) limited impact from its Changhua plant shutdown; and 3) its upcycle profitability vs. its mid-cycle valuation. As such, we expect further re-rating and set our upcycle target multiple at 2.1x 2017F P/B (vs. 1.9x previously), from which we derive our TP of NT$110.
Formosa Chemicals & Fibre is engaged in the manufacture and sales of petrochemical products including purified terephthalic acid, polystyrene, butadiene, stryene monomer ("SM"), SM polymer, benzene, toulene, p-xylene, o-xylene, nylon fiber and rayon staple fiber. Through its subsidiaries, Co. is also engaged in the manufacture and sales of rayon-grade wood pulp, machinery for chemical fibers, other industrial-grade chemical products and processed goods; spinning, weaving, dyeing and finishing of chemical fibers; water treatment; cable and machine installation; and import and export of aforementioned products and materials.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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