KUALA LUMPUR, May 30 — Research firms have remained optimistic with Petronas Chemicals Group Bhd’s (PetChem) earnings prospects, citing the strong correlation to its share price as firmer naphtha costs will support petrochemical product prices.
AmInvestment Bank Bhd expects stable near-term earnings as Brent crude oil prices have recently traded at or above the US$110 per barrel threshold compared with the first quarter of 2022 average of US$107 per barrel.
This is due to the improving earnings prospects of the group’s Pengerang Integrated Complex’s (PIC) operation in tandem with improved petrochemical price prospects, it said.
The research firm maintains a ‘buy’ call with an unchanged fair value of RM11.30 per share.
Meanwhile, RHB Investment Bank Bhd said the petrochemical plant at Pengerang is expected to commence operations in phases following the PIC start-up in early May.
The management is targeting the plant to achieve 50-60 per cent utilisation in the second half of 2022 (2H22) and subsequently ramp up to the optimal level of 90 per cent in 2023.
“We believe that the plant will record minimal losses in 2H22 during the ramp-up phase,” the firm said in a note, adding that it maintains its earnings estimates and target price at RM12.21.
MIDF Amanah Investment Bank Bhd said the global economic conditions in light of the growing inflation and interest rates, coupled with hiking petrochemical products prices in correlation with the surging crude oil prices, were expected to continue influencing PetChem's operations and plant utilisation rate.
It said the group reported that its production facilities were dependent on maintenance activities, availability of feedstock and utilities supply.
“As such, we believe the group would remain steadfast in its operations and management to sustain within and above the petrochemical industry’s regional benchmark.
“Nonetheless, the risk to its near-term performance remains to be the Covid-19 impact in China and its uncertainty globally, the volatility of crude prices in tandem with the Russia-Ukraine war, and tight supplies from supply chain disruption and Russian commodity sanctions.
“We echo PetChem's anticipation on petrochemical feedstocks and products to remain stable on the strength of demand recovery, albeit the possibility of weakened demand in China and limited supply due to the Russian sanctions.
All in, MIDF maintains its ‘buy’ call on PetChem with the revised target price of RM11.93 per share.
At 11.20am, PetChem's shares were flat at RM9.98 with 1.14 million units traded. — Bernama
