Westlake Chemical Partners LP (WLKP) PT Lowered to $21 at BofA Securities

BofA Securities analyst Steve Byrne lowered the price target on Westlake Chemical Partners LP (NYSE: WLKP) to $21.00 (from $22.00) while maintaining a Underperform rating.

The analyst comments "We remain cautious on Westlake Partners based on our view that we still don’t see a path towards restarting distribution growth. WLKP’s management has acknowledged that asset drop-downs and restarting distribution growth are “related”. The issue at hand is that the parent company Westlake does not need additional funds. Even as we project WLK’s 2024E EBITDA to drop to $2.4bn from $2.6bn last year, net debt/EBITDA is still at just at 0.4x and liquidity ample with $3.1bn in cash. Further, we expect WLK to be free cash flow positive in 2024, 2025, and 2026. Hence, we see no reason for WLK to use WLKP’s equity capital – even if costs are lower through the MLP than at the parent level. The other avenue to increase WLKP’s distribution is to raise the fixed 10cpp (cents per pound) ethylene margin charged to WLK (for 95% of produced volumes), which we view as unlikely in the near/intermediate-term. Merchant ethylene margins have historically averaged well above 10cpp, suggesting there was an opportunity for WLKP to close the gap to merchant margins, but this did not occur. Remain Underperform."

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