KUALA LUMPUR, Oct 6 ― RHB Investment Bank Bhd (RHBIB) has raised its earnings forecasts for Petronas Chemicals Group Bhd (PetChem) for the financial years ending December 31, 2021 to 2023 (FY21-FY23), by between three and 19 per cent on the back of stronger petrochemical prices.
In a research note today, it also maintained its “buy” call on the chemical producer with a higher target price of RM9.91 per share from RM9.11 previously.
“Despite projecting an 18 per cent decline in FY22 earnings, (PetChem’s) valuation remains attractive, trading below its five-year mean,” the investment bank said.
RHBIB said it expected further earnings upside if the moderation in average selling price (ASP) was less steep than anticipated, and the Petroliam Nasional Bhd (Petronas) subsidiary could kickstart the Pengerang Integrated Complex (PIC) project in Johor smoothly.
Similar to oil price trend, RHBIB sees the turning point of petrochemical price trend expectations being delayed.
“This is due to better-than-expected recovery in demand, and disruption in supply.
“We estimate that a one per cent swing in ASP will lead to 1.2-1.3 per cent change in earnings before interest, taxes, depreciation and amortisation (EBITDA), and management has guided that every US$10 per barrel movement in crude prices will lead to a seven to eight per cent swing in EBITDA,” it noted.
On PIC, RHBIB said its start was likely to be delayed further, with a gradual start-up to be fully operational by the first quarter of 2022.
Earlier this year, Petronas announced that PIC would begin only in the second half of 2021 compared to the earlier estimate of March 2021 due to the Covid-19 situation.
RHBIB said PetChem was still looking to achieve 60-70 per cent utilisation in 2022.
“We believe PIC will incur minimal losses in the first half (H1) of 2022 and only start contributing minimally in H2 2022,” it said, adding that plant utilisation in the third quarter of 2021 was expected to improve from 97 per cent in the immediate preceding quarter.
Plant utilisation stood at 94 per cent in H1 2021.
“Average plant utilisation could be higher than the earlier guidance of 93-94 per cent as management has postponed some plant turnaround to Q2 2022 riding on favourable ASPs,” it said.
At noon, PetChem shares were up 18 sen at RM8.87, with a total of 5.65 million shares traded. ― Bernama
