KUALA LUMPUR, Oct 18 — Maybank Investment Bank (Maybank IB) has turned “positive” on Petronas Chemicals Bhd’s (PChem) near-to-mid-term earnings outlook, on the back of sustained price firmness in the fertilisers and methanol (F&M) segment.
The investment bank said the supply constraints in the global fertiliser market were not expected to ease until mid-2022 and as such, it raised its earnings per share for PChem between financial year 2021 and 2023 estimates by 11 per cent/20 per cent/6.0 per cent, respectively.
“We upgrade PChem to a buy with a new target price of RM9.70. It also has a robust balance sheet with a net cash position of RM12.6 billion (RM1.58 per share) as at end-second quarter of 2021 and offers an attractive FY21/22E dividend yield of 4.2 per cent/3.3 per cent,” Maybank IB said in a research note today.
PChem’s F&M segment is the primary driver of its record-breaking 2Q21 — contributing 40 per cent/51 per cent of the group revenue/earnings before interest, taxes, depreciation, and amortisation, continues to be the shining light amidst tightening global supply and soaring average selling prices (ASPs).
In 3Q21, PChem’s ASPs for urea and ammonia were sequentially higher by 28 per cent quarter-on-quarter, while methanol prices posted a modest 8.0 per cent gain.
Average methanol prices in quarter-to-date in the fourth quarter of 2021, however, surged 19 per cent as Chinese supply remains constrained, while urea/ammonia ASPs have thus far held on to their 3Q21 gains, said Maybank IB.
The investment bank said the current supply tightness in the global fertiliser market is a by-product of three conflating factors, namely soaring natural gas prices that has rendered production at key European plants unfeasible, the fallout from Hurricane Ida shuttering ammonia plants and delaying shipments from US Gulf Coast states, and the Chinese government’s decision to instate export controls on fertiliser shipments, effective November 1.
It noted that elevated ASPs in PChem’s F&M segment were not expected to subside until the summer of 2022, as supply chain disruptions continue to exacerbate strong demand from economies emerging out of lockdown.
“Coupled with firm ASPs in the olefins and derivatives division and the absence of major turnarounds in the third quarter of 2021, PChem is on course to have an exceptional financial year 2021. With Pengerang Integrated Cmplex’s start-up on track in the fourth quarter of 2021, we are also sanguine about its prospects,” heading into FY22,” it added. — Bernama
