 2011-05-17 |
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Reporter Chen Yong-Ji, Taipei
Due to the decline in oil prices, upstream pressure on petrochemical raw materials has significantly increased, creating opportunities for downstream companies. Plastic film manufacturer Yih-Lang Chou (4306) saw its stock price hit a new high since October last year, with a trading volume of 16,000 lots, the largest in over a year. Analysts indicate that YC's financial forecast for this year is relatively conservative, with potential to exceed profit estimates in each quarter. However, its price-to-earnings ratio is not considered low compared to other petrochemical companies, so it is recommended to buy during price dips.
YC stated that the price of the raw material PP (polypropylene) remains high. However, downstream manufacturers believe that PP prices have limited room for further increases and face significant downward pressure. The tightening of monetary policy in China has also added pressure on PP manufacturers to clear their inventories. As a result, it is unlikely that current PP prices will hold, leading to a more favorable price spread for downstream products in the second quarter compared to the first.
In the first quarter of this year, YC's profit reached NT$297 million, exceeding its financial forecast target by 31.7%. The company noted that strong downstream demand in the second quarter, along with BOPP film price declines that are not as severe as raw material price drops, suggests that the price spread in Q2 should be better than in Q1. The company's core operations are expected to perform better in the second quarter compared to the first.
YC's consolidated revenue for April reached NT$1.71 billion, marking a 30.53% year-over-year increase and setting a new high since its public listing. The company internally estimates that Q2 revenue will gradually improve, surpassing Q1 growth. Optimistically, Q2 profit is expected to exceed financial forecast targets as well.
Currently, YC operates five BOPP film production lines with a monthly output of 2,500 to 3,000 tons. In January, YC’s subsidiary in Ningbo, China, successfully commenced production, contributing to increased equity method earnings in the first quarter. In October, an additional 3,000 tons of monthly production will begin at the Changbin plant in Taiwan. The group’s annual production capacity is projected to reach 160,000 tons. With the new production lines coming online and rising product prices, revenue is expected to continue growing, with Q4 projected to be the peak of the company's operational performance this year. |
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