Hong Leong Investment Bhd has upgraded made a “Buy” recommendation from a Hold for Petronas Chemicals Group (PCHEM) with a higher trading price of RM10.65 (from RM8.75) as it is of the view PCHEM is on track to achieve its best-ever annual profits in FY21
The investment house in its report said that the valuation is based on 9x FY22 EV/EBITDA, which is at a slight discount to its 5-year historical pre-pandemic mean EV/EBITDA of 9.5x.
It said that it expects strong earnings delivery from PCHEM in 2H21, uplifted by both: firm product spreads for its olefins and derivatives (O&D) segment, which can be seen from stable polyethene product prices (HDPE, LDPE and LLDPE) and skyrocketing urea and methanol prices, which would be supportive of earnings from the group’s F&M segment.
“With that, we upgrade PCHEM to BUY (from Hold) with a higher TP of RM10.65 (from RM8.75 previously) as we view that PCHEM is on track to achieve its best-ever annual profits in FY21.
“Our valuation is based on 9.0x FY22F EV/EBITDA, which is at a slight discount to its 5-year historical pre-pandemic mean EV/EBITDA of 9.5x,” HLIB said
