Formosa Plastics Group's 2Q net profit hits five-year high, reiterates full "positive rating" rating (J.P. Morgan)
J.P.
J.P. Morgan pointed out in the latest Taiwan Energy Report that the 2Q net profit of Formosa Plastics Group (including Nanya Plastics, Formosa Plastics, and Formosa Chemicals) climbed to a five-year high, showing strong performance. The report reiterated its overall "positive rating" rating for these stocks, believing that there is a clear trend of improving fundamentals. This was mainly due to the recovery of downstream demand and the expansion of product price spreads, which promoted a significant improvement in profitability. The current market may not have fully priced in the long-term impact of this earnings improvement, especially considering that its valuation is still in the historically low range. One-sentence conclusion: Formosa Plastics Group's earnings have bottomed out and rebounded strongly. The five-year high net profit data confirms the upward economic cycle. The current valuation is attractive and it is a high-quality choice for the recovery of the chemical industry sector. Positive/negative: Positive for Nanya Plastics (1303.TT), Formosa Plastics (1301.TT), and Taiwan Chemical (1326.TT). The current stock price may have partially reflected 2Q performance, but there is still room for valuation improvement, especially after market concerns about the sustainability of the chemical industry cycle subside. Catalysts: 1) Monthly revenue data from 3Q26 and beyond to verify the sustainability of earnings recovery; 2) Crude oil price trends, as a key variable on the cost side; 3) Global manufacturing PMI data, reflecting the strength of downstream demand.