RHB Research remains bullish on Petronas Chemicals Group Bhd (PCHEM), maintaining its BUY call and RM5.92 target price, implying around 30% upside, as the research house expects the petrochemical producer to deliver its strongest quarterly earnings of the current cycle in the second quarter of 2026 (2Q26).
RHB said PCHEM is likely to benefit from significantly stronger petrochemical selling prices during the quarter, although planned plant turnarounds and moderating commodity prices towards the end of June could temper the sequential improvement.
Nevertheless, the research house believes the full-quarter benefit from elevated average selling prices (ASPs) should more than offset the temporary impact from lower plant utilisation.
Petrochemical prices surge in 2Q26
Benchmark prices strengthened materially across both PCHEM’s Fertilisers & Methanol (F&M) and Olefins & Derivatives (O&D) segments during 2Q26.
F&M benchmark prices averaged US$680 per tonne for urea, US$728 per tonne for ammonia and US$611 per tonne for methanol, representing quarter-on-quarter increases of 27.9%, 54.1% and 56.9%, respectively.
O&D prices also rose, with ethylene increasing 27.2%, MEG 18.6%, polyethylene 25.9% and paraxylene 14.9% QoQ.
RHB noted that while the sharp increase in F&M prices only emerged towards the end of 1Q26, the second quarter captured the stronger pricing environment throughout the full quarter before prices moderated towards the end of June.
As a result, RHB estimates PCHEM’s 2Q26 core profit after tax and minority interest (PATMI) could reach between RM700 million and RM1.1 billion, compared with RM242 million in 1Q26.
The research house expects stronger realised ASPs and wider product spreads to more than compensate for lower utilisation, which is estimated at around 80% in 2Q26 due to planned turnarounds at ASEAN Bintulu Fertiliser and Kertih.
“F&M should remain the key earnings driver,” RHB said, adding that 2Q26 could represent the earnings high-water mark before earnings normalise from the second half of 2026.
Weaker ringgit provides additional boost
PCHEM’s reported earnings are also expected to benefit from a weaker ringgit during the quarter.
RHB noted that the average USD/MYR exchange rate rose to 4.00 in 2Q26 from 3.97 in 1Q26, providing a translation benefit given PCHEM’s net US dollar exposure.
Looking ahead, RHB expects petrochemical prices to remain supported in the second half of 2026, although they are likely to moderate from their 2Q26 peaks.
Urea prices have recovered to around US$445 per tonne from US$407.50 per tonne following a sharp correction from their April peak, supported by seasonal fertiliser demand.
With disruption around the Strait of Hormuz remaining unresolved, RHB expects continued supply-side tightness to support petrochemical prices and sees urea potentially recovering towards US$500 per tonne in 2H26.
Earnings forecasts and target price unchanged
Despite the expected earnings peak in 2Q26, RHB maintained its earnings forecasts and RM5.92 target price, based on an unchanged 1.3 times FY26 forecast price-to-book value (P/BV), in line with PCHEM’s five-year historical mean.
The research house believes the earnings recovery should support a gradual improvement in return on equity, justifying the use of the historical mean valuation multiple.
Overall, the research house remains constructive on PCHEM, with stronger petrochemical pricing expected to drive a significant earnings recovery in 2Q26, although it expects performance to normalise in the second half as commodity prices ease.
