Formosa Group 2Q net profit rose to a five-year high, and JPMorgan maintained overweight ratings across all covered names

Overview

This report focuses on 2Q26 results of Taiwan Formosa Group's energy and chemicals peers. Group net profit reached NT$64bn, the highest in five years, and the earnings beat was primarily driven by NPC electronic materials, FPCC’s robust refining export margins, and a temporary profit improvement at FPC from raw material cost lag effects. The report expects Formosa Group 2Q26 earnings to decline sequentially in 3Q as oil prices, refining spread conditions, and raw material lag effects fade, but expects the group still to benefit over the next few years from the cross-shareholding structure and gradual recovery in chemical spreads.

Core views

The core view is to maintain overweight ratings on the Formosa Group names and rank preferences as NPC > FPC/FCFC > FPCC. NPC is benefiting from CCL price hikes, higher utilization in glass fiber, copper foil, and epoxy resin, rising T-glass throughput, and progress on M10 certification, with electronic materials margins continuing to expand. FPCC may weaken in 3Q due to regional GRM normalization and olefin spread normalization, while 2H still has upside from geopolitical uncertainty and Russia-related capacity disruptions supporting refining export margins. FPC’s 2Q improvement partly comes from one-off raw material lag effects, but US ECC profit improvement is more supportive. FCFC was hit in 2Q by raw material shortages, and is expected to recover in 3Q with upstream supply normalization and stable aromatic spreads.

Analysis framework

The report uses a segment-by-segment performance breakdown and comparison with market consensus expectations, analyzing each of NPC, FPCC, FPC, and FCFC in terms of net profit, operating profit, sequential and year-on-year changes, while integrating product spreads, inventory gains/losses, utilization, export logistics self-sufficiency, raw material supply, and equity-method income to explain earnings differences.

Methodology notes

• equity_researchearnings_beat_analysis

  Earnings beat decomposition

  Compares 2Q26 net profit and operating profit against JPM and BBG consensus expectations, identifies the sources of the beat, and assesses sustainability.

• sector_margin_analysisspread_and_utilization_framework

  Spread and utilization analysis

  Assesses each segment’s margin sensitivity through CCL price hikes, Asia GRM, olefin spreads, aromatic spreads, plant utilization, and raw material supply.

• investment_ratingrelative_preference_ranking

  Relative preference ranking

  Within the same Formosa Group coverage universe, ranks names as NPC > FPC/FCFC > FPCC based on earnings upside drivers, sustainability, and near-term pullback risk.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nan Ya Plastics Corp / NPC / 1303.TW

  Core constructive beneficiary

  Strengths

  Electronic materials business is strong; 2Q26 net profit set a historical quarterly high, and higher CCL prices and rising utilization drove margin expansion.

  Weaknesses

  Some improvements in chemicals and polyester businesses may include raw material lag effects.

  Comparison

  Ranks first in the report’s preference order, ahead of FPC, FCFC, and FPCC.

  Risks

  Potential slowdown in electronics materials price hikes, T-glass or M10 roll-out shortfalls, and waning raw material lag effects.

• Formosa Petrochemical Corp / FPCC / 6505.TW

  OW name driven by refining export margins

  Strengths

  2Q26 net profit was significantly above expectations, export margins were strong, and self-owned shipping mitigated exposure to sharp VLCC freight increases.

  Weaknesses

  Could face sequential decline in 3Q from falling oil prices, regional GRM normalization, and olefin spread normalization.

  Comparison

  Ranks behind FPC/FCFC in preference order but remains at OW.

  Risks

  Oil price declines, GRM normalization, weakening olefin spreads, and larger inventory losses.

• Formosa Plastics Corp / FPC / 1301.TW

  Operating profit turnaround supported by US ECC improvement, OW

  Strengths

  2Q26 net profit was NT$10.6bn, with operating profit at the highest level since 3Q22; US ECC equity-method income improved significantly.

  Weaknesses

  Profit improvement from raw material cost lag is one-off, and most of the 3Q operating profit increase may unwind.

  Comparison

  Ranks second after NPC and tied with FCFC, ahead of FPCC.

  Risks

  Dissipation of raw material lag effects, weakening Asian PE prices, and rising US ethane costs.

• Formosa Chemicals and Fibre Corp / FCFC / 1326.TW

  OW name driven by supply normalization and aromatic spread recovery

  Strengths

  1H26 net profit already exceeded FY26 consensus, and 3Q is expected to recover as upstream supply normalizes and aromatic spreads remain solid.

  Weaknesses

  2Q operating profit fell more than 30% sequentially due to raw material procurement issues.

  Comparison

  Ranks tied with FPC, behind NPC and ahead of FPCC.

  Risks

  Raw material supply normalization slower than expected, constrained utilization of aromatics/PTA/ABS, and spread deterioration.

Key data

• Formosa Group 2Q26 net profitNT$64bnReached the highest level in five years, with the report stating that it again achieved a clean earnings beat.
• NPC 2Q26 net profitNT$26.8bn+88% q/q and turned positive y/y; above JPM estimate of NT$20.5bn and consensus estimate of NT$16.6bn.
• NPC electronic materials businessRevenue up more than 20% sequentially and OPM potentially above 20%Supported by CCL price hikes, rising utilization, and progress in T-glass and M10.
• FPCC 2Q26 net profitNT$21bn+2% q/q, +377% y/y, and significantly above consensus expectation of NT$7.5bn.
• FPCC 1H26 earningsNT$51bnAlready above FY BBG consensus of NT$38bn.
• FPC 2Q26 net profitNT$10.6bn3.2x higher sequentially and positive y/y; above 2Q consensus expectation of NT$5bn and FY26 consensus expectation of NT$8bn.
• FPC USA olefins equity-method incomeNT$1.1bnIncreased by NT$0.9bn from NT$0.2bn in 1Q.
• FCFC 2Q net profitNT$6.1bn-2% q/q, +189% y/y; 1H26 net profit was NT$12.3bn, above FY26 consensus of NT$11.8bn.
• Disclosed current prices1326.TW NT$60.00; 6505.TW NT$58.80; 1301.TW NT$54.80; 1303.TW NT$181.50The report disclosed all prices as of the 2026-07-09 close, with ratings all at OW.

Impact & implications

The report is generally positive on the whole Formosa Group chain, arguing that the 2Q beat strengthens market confidence in 2026 profit upgrades. Although 3Q profitability may weaken sequentially in the short term, if electronics materials price hikes continue, chemical spreads gradually recover, and geopolitical tensions support refining export margins, the group may continue a beat-and-raise trajectory over the coming years.

Risks

• Group 2Q26 earnings may decline sequentially in 3Q due to lower FPCC oil prices and the fade in FPC raw material lag effects.
• If regional GRM, olefin, and chemical spreads normalize quickly, profitability in refining and chemicals could weaken.
• If NPC electronics material price hikes, T-glass throughput, or M10 certification fall short of expectations, the sustainability of upward revisions could be affected.
• If FCFC’s raw material supply issues persist, recovery in utilization rates for aromatics, PTA, and ABS may be weaker than expected.
• The report discloses that J.P. Morgan has market-making, client relationship, potential investment banking compensation, and non-investment banking compensation links with several covered companies, so conflicts of interest should be monitored.

What to watch

• Subsequent NPC electronics materials price hike announcements, CCL, glass fiber, copper foil, and epoxy resin utilization.
• The pricing pace of peers such as Kingboard and the pass-through of commodity-grade electronics materials.
• FPCC 3Q regional GRM, olefin spread, oil prices, and changes in inventory gains/losses.
• Geopolitical uncertainty and the extent to which Russian production disruptions continue to support 2H refining export margins.
• Profit resilience of FPC US ECC under a $70-$80/bbl oil environment.
• FCFC upstream raw material supply normalization, aromatic spreads, and PTA/ABS utilization rates.