Improving sentiment drives petrochemical product price higher

Disclaimer & Disclosures Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.  Dennis H C Yoo*, CFA Analyst The Hongkong and Shanghai Banking Corporation Limited dennishcyoo@hsbc.com.hk +852 2996 6917 Thomas C Hilboldt*, CFA Head of Resources & Energy Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited thomaschilboldt@hsbc.com.hk +852 2822 2922 John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited john.chung@hsbc.com.tw +8862 6631 2868 Sriharsha Pappu*, CFA Analyst HSBC Bank Middle East Ltd sriharsha.pappu@hsbc.com +971 4 4236924 Shantnu Singh* Associate Issuer of report: The Hongkong and Shanghai Banking Corporation Limited 04 July 2017 *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations View HSBC Global Research at: https://www.research.hsbc.com HSBC Asia-Pacific Refining & Chemicals Weekly Chartbook EQUITIES ASIA PACIFIC  Refining margins edged up on lower inventory in the region; naphtha crack spread fell to 6-month lows on expectations of oversupply in the market  BD, ABS, styrene and rubber prices moved up on improved sentiment as crude oil price appeared to find the bottom  NE Asian petrochemical stocks outperformed on a rebound in chemical product prices Stock snapshot Sector Country Company name Ticker CRY Rating Target Price Last Price 1 week chg % Mkt cap (USD mn) 3M ADV USD mn 2017e P/E 2017e P/B 2017e EPS 2017e BVPS Refining CH PetroChina 857 HK HKD Hold 5.15 4.78 -1.4% 196,978 65.5 18.3 0.6 0.23 6.62 CH Sinopec 386 HK HKD Buy 7.15 6.09 -1.5% 103,665 63.4 10.4 0.9 0.51 6.10 CH SNP Shanghai Petrochem 338 HK HKD Buy 5.56 4.18 4.5% 9,009 8.3 7.5 1.4 0.49 2.53 SK S-Oil 010950 KS KRW Hold 102,000 94,800 -0.1% 9,331 23.8 10.0 1.6 9,476 60,177 SK SK Innovation 096770 KS KRW Buy 200,000 158,500 0.0% 12,813 39.1 6.6 0.8 24,052 202,824 TW Formosa Petrochemical 6505 TT TWD Hold 121 105 -3.2% 32,928 15.5 14.1 3.1 7.46 33.90 TH Thai Oil TOP TB THB Hold 89.00 79.00 1.0% 4,751 8.7 7.6 1.3 10.34 59.72 IN Bharat Petroleum BPCL IN INR Hold 656.00 639.40 1.4% 14,310 27.4 14.7 2.7 43.61 237.17 IN Hindustan Petroleum HPCL IN INR Buy 646.00 510.35 0.4% 8,023 23.5 9.4 2.6 54.33 193.68 IN Reliance Industries RIL IN INR Reduce 1,170.00 1,380.00 -3.9% 69,439 99.8 15.0 1.7 91.76 810.32 Chemical SK Kumho Petro Chem 011780 KS KRW Reduce 62,000 73,500 -1.2% 1,958 11.4 13.8 1.3 5,322 57,120 SK LG Chemical 051910 KS KRW Buy 360,000 291,000 2.6% 17,960 62.9 12.0 1.3 24,316 222,064 TW FCFC 1326 TT TWD Buy 105.50 95.50 3.7% 18,427 25.4 13.2 1.5 7.22 62.60 TW FPC 1301 TT TWD Buy 107 93 1.3% 19,427 18.7 14.9 1.8 6.22 50.80 TW NYP 1303 TT TWD Hold 77.00 75.50 3.7% 19,712 18.1 18.8 1.6 4.02 48.15 TH Indorama Ventures IVL TB THB Reduce 29.00 38.00 -2.6% 5,393 19.4 17.2 2.2 2.21 16.96 TH PTT Global Chemical PTTGC TB THB Hold 75.00 68.50 -1.1% 9,007 20.4 11.8 1.2 5.80 57.20 MY Petronas Chemical PCHEM MK MYR Reduce 6.5 7.10 -0.7% 13,214 12.5 19.2 2.0 0.37 3.57 Source: Source: Bloomberg, HSBC estimates, Prices as on 30 June 2017 Vote in Asiamoney Brokers Poll 20176July |Clickhere to voteImproving sentiment drives petrochemical product price higher EQUITIES ● ASIA PACIFIC 4 July 2017 2  Crude oil, refined products and the derivatives 3 Energy prices 4 Middle East Crude Oil Official Selling Prices (OSP) 5 Refining Margin: Long-term trend and seasonality 6 Refined product crack spreads 8 Lube Base Oil prices and margins 10 Refinery utilisation and relevant macro data: United States 11 Refinery utilisation and relevant macro data: Asia 12 Refined product inventory 13 Petrochemical product prices 15 Petrochemical product spreads 16 Petrochemical product prices and spreads: key charts 17 Weighted average product spreads by company 21 Company Share Price Trend & Relative to Index 23 Company Valuation Charts-12MF 27 Disclosure appendix 33 Disclaimer 36 Contents EQUITIES ● ASIA PACIFIC 4 July 2017 3 Crude prices and refining margins Crude oil, refined products and the derivatives Category Product 30 Jun 17 -1W WoW -4W MoM 2Q16 3Q16 4Q16 1Q17 2Q17 QTD QoQ YoY 2013 2014 2015 2016 2017 YTD 2010-16 avg Crude Price Dated Brent Spot 48.2 45.2 3.1 49.4 -1.1 46.0 45.8 50.1 54.0 50.2 -3.8 4.2 108.8 98.8 52.3 44.1 52.1 86.7 & Differentials Dubai Spot 46.6 44.2 2.5 47.9 -1.3 43.0 43.4 47.9 52.9 49.6 -3.2 6.6 105.4 96.5 51.2 41.3 51.2 83.9 (USD/b) WTI Spot 46.0 42.8 3.2 47.7 -1.6 45.6 44.9 49.2 51.8 48.2 -3.6 2.6 98.0 93.0 48.7 43.3 50.0 78.8 LLS Spot 48.2 44.8 3.4 49.8 -1.6 47.5 46.6 50.5 53.5 50.3 -3.2 2.8 107.4 96.6 52.4 45.0 51.8 86.9 Brent-Dubai 1.6 1.0 0.6 1.5 0.1 3.0 2.4 2.2 1.2 0.6 -0.6 -2.4 3.4 2.3 1.2 2.8 0.9 2.8 Brent-LLS 0.0 0.4 -0.4 -0.4 0.4 -1.4 -0.8 -0.5 0.6 -0.1 -0.7 1.4 1.4 2.2 0.0 -0.9 0.3 -0.2 OSP A