Petronas Chemicals Group Bhd 2QFY22 earnings were nearly flat by +0.9%yoy but slipped -9.7%qoq to RM1.87b. For the cumulative first half, earnings gained by +18.8%yoy to RM3.94b – which came in within MIDF’s expectation at 93%. The group said the nearly flat profit was due to lower sales, mitigated largely by higher foreign exchange gain on revaluation of shareholder loan to a joint operating company.
PCG reported a rise in revenue but slipped marginally by -0.8%qoq to RM6.58b. Cumulatively for 1HFY22, revenue increased by +28.5%yoy to RM13.22b. Revenue was up mainly due to higher product prices in tandem with the improved crude oil price amidst tight supply, partially offset by lower sales volumes. The group also recorded a lower plant utilisation rate of 72% in 2QFY22, compared to 97% in 1QFY22, and 79% utilisation in1HFY22, compared to 94% in 1HFY21. This is mainly due to plant shutdowns for heavy turnarounds and maintenance activities resulting in lower production and sales volumes.
According to MIDF, the near-term performance is expected to be influenced by various issues, like the global economic conditions, petrochemical products prices in correlation to crude oil price, utilisation rate of production facilities, and foreign
exchange rate movements. Utilisation of production facilities is dependent on plant maintenance activities, as well as
sufficient feedstock and utilities supply. Another challenge to look out for is the market volatility influenced by the ongoing
Covid-19 pandemic which continues to affect global supply chain and consumer demand for petrochemical products.
Coming into 2HFY22, PCG is expecting O&D product prices to remain stable amidst a balanced supply-demand, while F&M
product prices are to be moderately supported by the elevated crude oil prices. MIDF has made no changes to the FY23-FY24 earnings estimate. Given that PCG’s 2QFY22 financial performance is within the trajectory of expectations.
Hence, the research house maintains its target price at RM11.93 for PCG, based on pegging PER of 11.3x on a revised EPS22 of 106sen. The PER is based on the group’s best 5- year average. All in, MIDF maintains a BUY call on PCG with the target price of RM11.93 per share.
