National oil giant Petronas in its latest 9M 2022 esults were expectedly strong said Maybank IB, with its core net profit of RM72b which is a 173% YoY which is on track to meet the research house’s RM100b target.
Accordingly, capex was also up 34% with domestic capex rising by MYR2b YoY, benefitting the local OGSE players. In view of this, Maybank IB has places a BUY call on Yinson, Dialog & Hibiscus. BAB, Velesto, WSC and MMHE are SMID BUYs.
As expected, PETRONAS replicated its QoQ performance, with core net profit of MYR25b (-3% QoQ) in 3Q22. This took 9M22 core earnings to MYR72b. The YoY strength was driven by higher oil prices (dated Brent; +55% to USD103/bbl) and its production/ entitlement. Net cash was at MYR94b up 46% while its FCF improved by 63%x YoY to MYR56b. Petronas spent a higher CAPEX to-date (62% upstream, 15% gas & new energy, 12% downstream, 10% corporates & others) while Domestic CAPEX was up MYR2b YoY.
Maybank IB belives the oil giant is on track to reach MYR100b core NP in FY22 and expects the fine financial performance momentum to extend into 4Q22, with an MYR100b core NP within reach in FY22. The banking research house expects the oil price to remain elevated, as the winter period approaches and geopolitical risk remains high.
Crude oil (avg) estimate for FY22 is unchanged, at USD100/bbl (Brent) and does do not rule out a higher oil price outlook in FY23 considering the continued tightness in the global supply market, due to the prolonged structural under-investment since 2015.
Petronas will also intensify its efforts in carbon emissions abatement and scaling up its investment allocation on carbon neutral projects. With its NZCE 2050 pathway announced on 1 Nov 2022, the group has set a near-term target to cap operational emission to 49.5m tonnes of CO2e by 2024 in Malaysia and achieve 25% absolute emissions reduction Groupwide by 2030 (based on 2019’s baseline). For this, it will allocate 20% of its capex for decarbonisation projects and expansion into cleaner energy solutions over the next 5 years (2023-2036).
