• Overview. LC Titan 1Q21 core profit grew by multi-fold to RM424m mainly benefitting from higher polymer prices amidst shortage in the US and Europe. It was also aided by turnaround in its associate company, LC USA who contributed RM50m to the bottomline mainly due to higher MEG price. Sales volume was stable at 518k MT (4Q20: 493k MT).
   
• Key highlights. 1Q21 plant utilization (PU) rose to 88% (4Q20: 85%) on lesser maintenance activities. Management expects to achieve higher PU of 85-90% in FY21 (FY20: 82%) despite the planned maintenance shutdown for Cracker 1 and PE1 plants in Jul 2021.

• Against estimates: Inline. 3MFY21 core profit made up 49% of our forecast. We deem this as within our estimate as we expect earnings to normalise in 2H21. On the contrary, it came ahead of consensus estimate at 100%.

• Outlook. Polymer prices have softened slightly from its peak in March 2021 but average spread remains higher on qoq basis. We keep our earnings forecast unchanged at this juncture but acknowledge that earnings risk is firmly on the upside.

• Dividend. No dividend was declared for 1Q21 as expected. However, investors will be entitled to a 3.27sen DPS for FY20 with ex-date on 30th Apr 2021.

• Our call. Stock price has gained by 19% since our BUY call upgrade in the middle of April, but we still see significant upside from current level. Maintain our TRADING BUY call on the stock with unchanged TP of RM3.70 which is based on sum-of-parts methodology and implied 0.7x FY21F P/B (Table 3).

Source: BIMB Securities Research - 30 Apr 2021