LCTITAN: Earnings Soared

Background

Lotte Chemical Titan Holdings Bhd ("LCTitan") is a petrochemical producer. Its main products are polyolefins and olefins.Polyolefin products accounts for 18% & 9% of revenue & segmental results respectively while olefins & derivative products accounts for 82% & 91% of revenue & segmental results respectively.

Financial Performance

For QE31/3/2021, LCTitan's net profit rose 191% q-o-q to RM440 million on the back of a 23%-increase in revenue to RM2.367 billion. As compared to the results in the corresponding quarter last year, LCTitan has returned to the black due to increased sales volume & selling price. This, combined with higher plant utilization of 88%, helped to results of the group.

 

 Table: LCTitan's last 8 quarterly results

Looking at the graph below, we can see that LCTitan's profit has exceeded the high achieved in QE30/6/2016.

Graph: LCTitan's last 21 quarterly results

Financial Position

As at 31/3/2021, LCTitan's financial position is deemed healthy with current ratio at 7.03 times while gearing ratio was at only 0.14 time. 

Valuation

LCTitan (closed at RM2.99 last Wednesday) is now trading at a PE of 9 times (based on last 4 quarters' EPS of 33 sen). Based on this, LCTitan is deemed to be an attractive investment.

Technical Outlook

Looking at the weekly chart below, we can see that LCTitan broke above its downtrend line (in red) at RM1.80 in May 2020. Its uptrend since then has been capped just below RM3.00 (to be more precise at RM2.95). Last Wednesday's results announcement boosted the share price passed the resistance of RM2.95-3.00. This may mark the continuation of the uptrend in LCTitan's share price.

 

Chart: LCTitan's weekly chart as at April 28, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on the good financial performance & position, attractive valuation & positive technical outlook, LCTitan is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.