KUALA LUMPUR (Nov 14): Petronas Chemicals Group Bhd (PetChem) extended its downtrend, falling as much as 18 sen or 2.4% to RM7.20 this morning, after the group announced that its third-quarter net profit had more than halved to RM553 million from RM1.21 billion a year ago.
At 10.15am, PetChem was the largest decliner amongst all component stocks, trading 12 sen or 1.6% down at RM7.26 after a total of 935,400 shares exchanged hands.
Meanwhile, Petronas Dagangan Bhd came in second after falling 30 sen or 1.24% to RM23.80 as of writing, although trading volume was thin.
Affin Hwang Capital analyst Tan Jianyuan said PetChem's profit drop during the traditionally weak third quarter was "sharper-than-expected", signalling that PetChem continues to suffer from a weaker average selling price (ASP).
The analyst downgraded PetChem to a "Sell" and slashed the target price on the stock to RM6.40, from RM7.81 previously.
"[PetChem's] 3Q19 core profit fell to a level not seen since 2Q15. While share price fell by 5% yesterday after the poor results, we believe there could be further downside risks yet to be priced in from potential start up losses in Pengerang RAPID plant.
"With a lacklustre near-term outlook, we cut our financial years 2019-2021 (FY19-21E) earnings by 8%-18% as we believe PetChem will continue to face weak petrochemical ASP," said Tan.
Meanwhile, MIDF Amanah Investment Bank Bhd Research analyst Noor Athila Mohd Razali shared a more optimistic outlook for the group. The research house maintains its "Buy" call on the stock with an unchanged target price of RM8.77.
"We remain sanguine on company given that its fundamentals remain intact and we foresee some form of recovery in product prices given the recent performance of the crude oil price.
"Additionally, with the full-commissioning of RAPID Pengerang next year, we are expecting PetChem to start moving towards producing more differentiated and specialized products starting with the commissioning of PC Isononanol in Pengerang," she wrote in a note this morning.
Furthermore, with the completion of its statutory turnaround activities, production volumes will be restored to pre-turnaround period and further ramp-up from Pengerang — which will be able to produce a wider product range (C2-C6) compared to Kerteh and Gebeng combined — will assist in arresting the impact from the subdued product prices if it lingers into next year, she added.