Company Overview

Indorama Ventures (IVL) is one of the world’s largest polyester chain makers with a total production capacity of 17 million tonnes. The company’s stock is categorized under the Materials sector, with a Bloomberg ticker of IVL TB. The Lohia family holds a significant 66% of the shares, followed by Bangkok Bank at 4.8%.

Share Performance and Target Price

Currently, IVL’s share price stands at Bt25.75, with a target price of Bt32.00, indicating a potential upside of 24%. Despite a challenging year, with a 52-week high/low of Bt33.25/Bt17.70, the company is expected to recover strongly in 2025.

3Q24 Results: Beating Estimates with Positive Changes

IVL delivered stronger-than-expected earnings growth in 3Q24, with net profit surging by 670% year-on-year (yoy) to Bt1.5 billion. The core profit also witnessed a remarkable rise of 678% yoy and 145% quarter-on-quarter (qoq), reaching Bt3.0 billion. This performance significantly exceeded both our and market estimates. For the first nine months of 2024, IVL’s core profit increased by 44% yoy to Bt5.5 billion.

Key Financial Highlights

The company’s revenue for 3Q24 was Bt137,413 million, a slight decrease of 1% yoy. However, the core EBITDA showed a substantial growth of 36% yoy to Bt14,632 million. Despite some inventory losses, the reported EBITDA increased by 14% yoy to Bt13,007 million. The net income for the quarter stood at Bt1,505 million, reflecting a yoy growth of 670%.

Margin Expansion and Sales Volume

IVL’s sales volume reached 3.5 million tonnes, up 4% yoy due to demand recovery with no impact from destocking. However, there was a 2% qoq decline due to lower seasonal demand for PET products. The EBITDA margin in 3Q24 rose by 27% yoy to US\$121/tonne, driven by better cost savings and higher product spreads. Management reported a fixed cost reduction of US\$19 million in 3Q24 following the permanent shutdown of its PTA plants in Europe.

Future Projections and Growth Potential

Looking ahead, IVL is expected to sustain its strong earnings growth momentum into 2025. The restructuring and asset optimisation programme are anticipated to transform IVL into a growth company once again. The company’s earnings for 4Q24 are projected to be between Bt2.4 billion and Bt2.5 billion, with seasonal weaknesses offset by additional cost savings from asset optimisation.

2025 Earnings Forecast

For 2025, IVL is forecasted to deliver a robust 114% yoy growth in core profit, benefiting from US\$150 million in cost savings, a US\$20 million decline in depreciation costs, and lower interest rate expenses. The market is expected to revise its earnings forecasts upward, incorporating the results and management’s latest guidance.

Spin-off Plans

IVL’s management has reaffirmed its plans to spin off and list two assets: the downstream IOD business (Indovinya) and the packaging business. This IPO aims to unlock shareholder value and strengthen the company’s financial ratio, with an expected execution by 2026. These value-unlocking events are anticipated to provide significant value creation in 2026.

Earnings Revision and Valuation

We have revised our 2024 core profit forecast upward by 35% to Bt8.0 billion, reflecting the higher-than-expected earnings in 3Q24. We maintain a BUY recommendation with a 2025 target price of Bt32.00, based on 14x 2025F PE. IVL is currently trading at only 11.4x 2025F PE, indicating increasing upside risk to consensus earnings estimates.

Share Price Catalysts

• 4Q24: Benefit from cost savings.
• 1H25: Seasonal high for PET demand.

Environmental, Social, and Governance (ESG) Initiatives

Environmental

IVL is committed to reducing greenhouse gas emissions and improving resource productivity across its value chain. The company targets a 10% combined GHG intensity reduction by 2025.

Social

IVL conducts 65 initiatives to promote recycling awareness and education, alongside 165 initiatives supporting infrastructure and health. Additionally, IVL has implemented a global Environment, Health, Safety, and Sustainability Software Management System.

Governance

IVL has received an “Excellent – 5 Star” CG score from the Thai Institute of Directors (IOD) for the ninth consecutive year.

Financial Projections

Profit & Loss

For the years ending on December 31, the financial projections are as follows:

• 2023: Net turnover of Bt541,458 million, EBITDA of Bt31,510 million, and a net profit (adj.) of Bt2,332 million.
• 2024F: Net turnover of Bt548,514 million, EBITDA of Bt52,095 million, and a net profit (adj.) of Bt7,982 million.
• 2025F: Net turnover of Bt615,942 million, EBITDA of Bt60,614 million, and a net profit (adj.) of Bt12,785 million.
• 2026F: Net turnover of Bt734,884 million, EBITDA of Bt69,772 million, and a net profit (adj.) of Bt18,605 million.

Balance Sheet

As of December 31, the projected balance sheet highlights include:

• 2023: Total assets of Bt590,132 million, LT debt of Bt173,824 million, and shareholders’ equity of Bt164,362 million.
• 2024F: Total assets of Bt591,144 million, LT debt of Bt175,824 million, and shareholders’ equity of Bt141,694 million.
• 2025F: Total assets of Bt621,587 million, LT debt of Bt177,824 million, and shareholders’ equity of Bt149,988 million.
• 2026F: Total assets of Bt622,735 million, LT debt of Bt179,824 million, and shareholders’ equity of Bt163,821 million.

Cash Flow

The cash flow projections for the years ending on December 31 are as follows:

• 2023: Operating cash flow of Bt25,687 million, investing cash flow of Bt(14,752) million, and financing cash flow of Bt(13,464) million.
• 2024F: Operating cash flow of Bt31,827 million, investing cash flow of Bt(25,450) million, and financing cash flow of Bt(247) million.
• 2025F: Operating cash flow of Bt51,908 million, investing cash flow of Bt(49,632) million, and financing cash flow of Bt1,158 million.
• 2026F: Operating cash flow of Bt23,730 million, investing cash flow of Bt(24,100) million, and financing cash flow of Bt293 million.

Key Metrics

The key financial metrics for IVL are projected as follows:

• 2023: EBITDA margin of 5.8%, ROE of (6.2)%, and debt to equity of 146.5%.
• 2024F: EBITDA margin of 9.5%, ROE of (12.1)%, and debt to equity of 172.7%.
• 2025F: EBITDA margin of 9.1%, ROE of 8.8%, and debt to equity of 170.8%.
• 2026F: EBITDA margin of 9.5%, ROE of 11.9%, and debt to equity of 159.3%.