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Plastic's Pervasive Presence

Take a moment to glance over your own desk, can you count the number of items made from or containing plastic? As for my own desk, captured in this photo, I estimate there are about 10 items that are made of plastic.

Plastic, with its core materials being Polyethylene and Polypropylene, are pillars in the petrochemical industry and are instrumental in producing an array of consumer and industrial goods.

Polyethylene is usually found in the subtle crinkle of plastic films to the sturdy walls of containers, the curves of bottles, and the convenience of plastic bags.

On the other hand, Polypropylene oftenly used in packaging, lending its flexibility to films and sheets, its strength to fibers and filaments, and its durability to the myriad of toys and automotive parts we use daily.

The petrochemical industry is a cornerstone of modern manufacturing and consumer goods, and within this sector, TPIA stands as Indonesia's largest player with an impressive capacity of 4.2 mn tons per year.

This market leadership, especially in the production of those fundamental petrochemicals, showcases TPIA's pivotal role in meeting the country's demand for these essential materials.

China, as the largest consumer of petrochemical products, is experiencing an economic slowdown, intensified since the COVID-19 outbreak.

This has led to an industry shakeout, with weaker companies operating in the same business as TPIA shuttering, contrary to earlier recovery predictions. This trend may create opportunities for robust companies like TPIA to capture increased market share.

In this expanding market, TPIA's dominant position, with a 40% market share in PE and 32% market share in PP, positions it exceptionally well to capitalize on this growth.

The 2011 merger of PT Tri Polyta Indonesia Tbk and PT Chandra Asri fortified TPIA as a fully integrated petrochemical leader, streamlining the entire production-to-distribution chain.

This strategic move has not only cemented TPIA's ability to meet domestic demand but has also enhanced its competitive stance globally.

In terms of financial performance, our analyst, Andreas, is projecting 13% CAGR in net revenue by 2030. This forecast is underpinned by an expected surge in sales volume, anticipated to escalate from 2.2 mn tons in 2023 to 4.6 mn tons by 2030.

Recognizing the economic downturn in China, TPIA has prudently decided not to double its capacity this year, opting for a strategic delay.

With over USD 2bn in liquidity, TPIA is allocating resources for acquisitions, eyeing transformation, notably diversifying into the energy infrastructure business.

TPIA recently acquired a 70% stake in Krakatau Daya Listrik (KDL) and a 49% stake in Krakatau Tirta Industri (KTI), marking significant expansions into power generation and water treatment.

Looking ahead, TPIA is also positioning itself in the burgeoning electric vehicle market, with the production of caustic soda, a key material for electric car batteries, set to begin in 2026.

We believe this strategic diversification underscores TPIA's vision to power a future driven by sustainable and innovative energy solutions.

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