Rising Regulation And Oversupply Will Crush PET Margins

Key Takeaways

• Tightening global regulations and consumer shifts away from plastics are eroding demand for core products, raising compliance costs, and narrowing future revenue opportunities.
  
• Ongoing overcapacity and commodity focus expose the company to intense margin pressure, persistent earnings risk, and instability from volatile input costs and tariffs.
  
• Structural transformation, regional expansion, and balance sheet discipline are strengthening resilience, margin potential, and earnings quality while supporting innovation and growth in specialty and sustainable products.

Catalysts

Manufactures and distributes petrochemical products in Thailand, the United States, Brazil, and internationally.

• Persistently intensifying global regulatory pressure on single-use plastics and petrochemicals is expected to erode long-term demand for Indorama Ventures' core PET and polyester products, while simultaneously raising compliance costs, which will negatively impact revenue growth and net margins.
  
• Accelerating global shift by consumers and businesses toward circular economies and alternative biodegradable materials is set to reduce the relevance of traditional PET and fiber, limiting the company's addressable market and creating structural headwinds for topline growth over the coming years.
  
• Chronic overcapacity in the global PET and polyester value chain-especially as new Chinese capacity continues to outstrip demand-will perpetuate margin compression, increase earnings volatility, and constrain long-term profitability despite management's asset optimization efforts.
  
• Substantial exposure to commodity PET and PTA with only gradual shift toward higher value-added products leaves Indorama Ventures vulnerable to price cycles, further heightening risk of prolonged margin pressure and lower earnings even if digital and operational improvements are realized.
  
• Volatility and escalation in input/feedstock costs, together with geopolitical tariff uncertainty, threaten to destabilize cost control and supply chain reliability, putting further downside pressure on operating margins and future earnings.

Indorama Ventures Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Indorama Ventures compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Indorama Ventures's revenue will decrease by 8.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -0.1% today to 3.0% in 3 years time.
• The bearish analysts expect earnings to reach THB 11.5 billion (and earnings per share of THB 1.82) by about August 2028, up from THB -515.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, up from -234.1x today. This future PE is greater than the current PE for the TH Chemicals industry at 12.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.63%, as per the Simply Wall St company report.

Indorama Ventures Future Earnings Per Share Growth

Risks

• Indorama Ventures' strong local-for-local manufacturing model and diversified global presence, particularly in the Americas and Asia, provides resilience against trade volatility and tariffs, which supports stable revenue and limits earnings downside in a turbulent environment.
  
• Ongoing structural transformation under IVL 2.0, marked by asset optimization, rationalization, and disciplined fixed-cost management, is delivering significant annualized cost savings, enhancing net margins and positioning the company for margin expansion even in weak industry cycles.
  
• Strategic investments and expansions in high-growth regions such as India and Africa, alongside acquisitions like the 24.9% stake in EPL, are expected to drive topline growth and diversify revenue streams, reducing exposure to mature or oversupplied markets.
  
• Indovinya, the specialty chemicals business, is increasingly focused on high-value applications, new product innovations, and digital transformation, leading to an improved blended margin profile and incremental EBITDA contribution over the long term.
  
• The company's emphasis on balance sheet discipline, proactive refinancing at lower rates, strong liquidity ($2.2 billion), and plan to monetize non-core assets through IPOs and divestitures will enhance financial flexibility and enable continued investment in sustainability and recycling, supporting sustainably higher free cash flow and improved earnings quality.

Valuation

• The assumed bearish price target for Indorama Ventures is THB18.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Indorama Ventures's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of THB29.0, and the most bearish reporting a price target of just THB18.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be THB377.9 billion, earnings will come to THB11.5 billion, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 14.6%.
  
• Given the current share price of THB21.5, the bearish analyst price target of THB18.0 is 19.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.