On Monday, the share price of Indorama Ventures Public Company Limited (SET: IVL) closed the morning session at THB 21.80, a THB 2.3 or 9.54% decrease with a total trading value of THB 64.96 billion.
A source from various brokerage firms indicated that the recent selling pressure on IVL followed Morgan Stanley’s decision to downgrade its recommendation from “Overweight” to “Underweight”, while also reducing its target price to THB 19 from the previous THB 26.90. Although there are initial signs of a recovery in the petrochemical sector, the firm cited structural problems at IVL that could keep its return on capital employed (ROCE) below its cost of capital.
Morgan Stanley noted that while IVL is undertaking business restructuring, shuttering four loss-making facilities, and accelerating cost-cutting measures, it forecasted IVL’s ROCE in 2027 at around 2%—still below many of its competitors. This could mean that any improvement in earnings would be insufficient to significantly lift the company’s share price.
Over the past decade, IVL’s average operating cash flow stood at roughly $1.1 billion per year, but its average investment return was only about 3%. This reflects that the company’s growth over that period may not have fully created value for its shareholders.
Financial health remains another area of concern. Morgan Stanley estimated that IVL will report meaningfully positive free cash flow (FCF) once annual operating cash flow exceeds $1 billion. However, currently, about two-thirds of this cash is allocated to interest payments and maintenance expenditure, resulting in a slower pace of debt reduction compared to industry peers.
Morgan Stanley also anticipated that IVL’s net debt to equity ratio will remain elevated at approximately 173% in 2027—one of the highest among its peers.
Although the overall petrochemical cycle is showing signs of improvement, driven by a recovery in PET operating rates following capacity closures in China and limited new capacity between 2026 and 2027, Morgan Stanley believes the PET Spread has already peaked in the second quarter of 2026. The spread is expected to gradually return to normal levels in the second half of 2026 through 2027.
Furthermore, under the assumptions of higher costs, weaker-than-expected PET demand, and increased CAPEX, Morgan Stanley has revised down its EBITDA forecast for IVL in 2026 – 2027 by 26%, and cut its earnings per share (EPS) estimates by 37% and 51%, respectively.
