Citi Though he expects its 2022 earnings to decline with lower methanol production attributable to natural gas curtailments in New Zealand, Trinidad and Chile, Citi analyst Eric Petrie sees an “attractive” entry point for Methanex Corp.
“Methanol prices should remain supported by higher oil prices, delayed new capacity and demand from MTO plants by year-end 2021,” he said. “There is upside to our target price if management secures a long-term gas supply contract for its Trinidad Titan plant, which we have removed from our estimates. Higher methanol prices and ample gas in the U.S. are supportive for the restart of construction on G3 (1.8mmt) as a decision is expected summer 2021.”
Keeping a “buy” recommendation, Mr. Petrie lowered his target for Methanex shares to US$45 from US$55. The average on the Street is US$40.85.
“Our price discount is also raised to 17 per cent on greater competition as methanol prices sit above the cost curve near $260 per ton according to management,” he said. “As a result, our target price declines to $45, based on unchanged 7.5 times forward EV/EBITDA, and excludes any production contribution from Titan. If MEOH is able to secure a long-term gas contract for the Titan plant (870kt), all else equal, our valuation would be $4 higher, assuming 70-per-cent utilization in 2021.”