EPCL Engro Polymer Financial Analysis 18th Nov. 2019

PVC prices on Chinese largest exchange for this range of products are trying to bounce back and this may bounce back would initially continue towards 6,900 CNY/Ton and if it would succeed in closing above that region then a bullish sentiment would be generated which would try to lead this rally towards 7,300 to 7,500 CNY/Ton. On flip side 6,200 to 6060 CNY/Ton region would react as a major supportive region and this region would try to support prices on longer because in last ten years in 2015 & 2016 prices have remained below that region and have tried to break that region multiple time but when succeeded in closing above that region then a sharp spike was witnessed in a single month. It’s expected that this price growth would continue till June 2019.

US export polyvinyl chloride prices were expected to settle this week after two producers nominated levels last week. One nominated pricing up $20/mt and another up $40/mt from November levels. Those nominations, if accepted, would put prices in the $770-$780/mt FAS Houston and $800-$825/mt FAS Houston, respectively, range. Market sources were skeptical that anything above a rollover of November pricing would be accepted, given continued soft demand in key global markets such as Africa and the Middle East. Export volumes availability was also expected to be limited this month as Shintech wraps up a six-week, complex-wide turnaround at its Plaquemine, Louisiana, operations and OxyChem looks to complete its ongoing 10-day turnaround at its Pasadena, Texas, complex.

EPCL have around 64% domestic market share in PVC production and company have recorded 7.75% growth in its PVC production volumes during first nine months of current year and today PVC prices are trading at 860 $/MT in Pakistan while Indian PVC prices are recorded at 910 $/MT, UAE & Afghanistan are major importers of Pakistani PVC and prices at these regions are inching up which would ultimately provide add on benefits to EPCL, while export prices from USA are nominated higher. Higher export prices from USA, emerging demand from UAE, India and Madagascar would add additional export orders. Madagascar has approximately more than 10 companies processing plastic products, such as tubes, pipes, plates, buckets and bags but local demand is way far from local production and they have started importing vinyl from Pakistan and till oct. 2018 they already have imported 170 ton of Polyvinyl from Pakistan and export trend seem increasing. Due to higher demand, price increment trend and a huge market share our forecast for annual earning for year 2018 lays between 5.34-5.47 Rs per share with an annual growth of 92.09%-96.76% and we foresee price increment of 33.88% from last closing price towards 49 Rs per share till June 2019.

EPCL is moving an upward price channel on weekly chart and right now it’s coming back after getting resistance from resistant trend line of said channel to complete 4th corrective wave of its bullish Elliot wave and this wave would be complete before 32.60 Rs, it’s expected that fifth wave would be completed after completing 100% Expansion of current correction which would be completed at 49 Rs which may expand towards 52 Rs/share. EPCL could be started accumulating from 36 Rs and it could be averaged out till 34.00 with target at 49 & 52 Rs till June 2019.