- 2021 will be a brilliant year for the global PET market
- Improving MEG and MTBE margins would be a plus
- Strong product spreads prompt earnings and target price upgrade
Broad demand improvement and supply tightness has pushed IVL’s main product spreads up substantially this year, making us more optimistic about the firm’s 2021 core earnings growth outlook. Expectations of hefty core profit expansion should see IVL’s stock price outperformance continue. And there’s scope for upside to our forecasts and valuation from new investments. BUY!
2021 will be a brilliant year for the global PET market
The global polyester (PET and fibers) market has gradually improved from its bottom in 2019 when capacity expansion materially outpaced demand growth. The supply surplus eased in 2020 while the emergence of COVID-19 has augmented demand for PET resin (used to make F&B packaging), one of IVL’s main products, and boosted the PET spreads since then. Moving into 2021, the global polyester market has been even tighter, driven by broad demand improvement, inventory building and product tightness (due to a winter storm in Texas).
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