KUALA LUMPUR – Petronas Chemicals Group Bhd (PetChem) is expected to deliver another strong set of results in the second quarter of financial year 2021 (Q2 FY2021), with its methanol and urea prices holding up relatively well, RHB Research Institute said.
“We increase our forecast earnings for 2021-2022 (FY21F–FY22F) by 12% to 35% to impute higher margins,” it said in its note today.
In view of PetChem’s industry capacity additions, the research firm imputed a relatively weaker price trend in the second half of FY2021 (H2 FY2021), also in line with its relatively flattish oil price assumptions for PetChem.
Thus, RHB Research maintained a “buy” rating on the company, with a higher target price (TP) of RM9.11 per share.
In the meantime, AmInvestment Bank Bhd has upgraded its call on PetChem to a “buy” from “hold”, with a higher fair value TP of RM10.60 per share from RM8.30 per share earlier.
“We have raised Petronas Chemical’s FY21F–FY22F earnings by 51%- 58% from the 15%-20% increase in product price assumptions, as the group’s Q1 FY2021 net profit of RM1.46 billion exceeded expectations, accounting for 47%-56% of our and street’s FY21F net profit,” it said.
Meanwhile, Maybank IB Research also expects PetChem’s earnings to remain strong in Q2 FY2021 but said that this could soften in H2 FY2021 due to higher supply.
It said Q1 FY2021 results were above expectations as the average selling prices (ASP) peaked in March 2021 but noted that it had softened thereafter.
“That said, the average ASP in the quarter to date of Q2 FY2021 is still slightly higher than that of Q1 FY2021.
“As such, we expect Q2 FY2021 to remain solid but to soften in H2 FY2021 on the back of higher supply and the easing of logistical issues,” it said.
Consequently, Maybank IB has downgraded its call on PetChem to “hold” from “buy”, maintaining its TP at RM8.25.
At noon break, PetChem’s shares fell by five sen to RM8.12, with 1.18 million shares traded. – Bernama, May 28, 2021
