PVC margin declined by 9%
PVC margins have declined by USD75 per ton due to an uptick in ethylene prices. It will have a negative impact on local PVC products.
PVC-Ethylene margin fell by 9% week on week (WoW) basis to US$775/ton hitting a one-and-a-half month low.
The margin narrowed on the back of an 18%WoW jump in Ethylene prices, currently hovering at US$990/ton driven by robust demand and a fall in supply from the United States.
Meanwhile, PVC prices were stable on a weekly basis at US$1,270/ton on account of maintenance shutdowns announced by few Asian PVC producers and higher demand.
Thus, higher Ethylene and stable PVC prices contracted margin by US$75/ton WoW. So far, in the ongoing quarter, PVC-Ethylene margin is still higher and has averaged around US$800/ton, up 20% from an average of US$665 during the same period of the preceding quarter.
As per calculations, any US$10/ton change in primary margin alters annualized EPS by around Re0.3 (assuming new capacity remains unutilized).
We maintain ‘Buy’ stance on EPCL- our top pick in the chemical sector, currently trading at an implied margin of US$390/ton, far cheaper than the current international PVC-Ethylene margin of US$775/ton, Sherman Research said.
