KUALA LUMPUR (Aug 26): Petronas Chemicals Group Bhd (PetChem) was on the top gainer list this morning as the stock rose 5.5% or 45 sen to RM8.60 following a 10-fold jump in net profit to RM1.86 billion for the second quarter ended June 30, 2021 (2QFY21).
The group also declared a first interim dividend of 23 sen a share for 2QFY21.
The improved results were due to revenue rising largely due to higher product prices in tandem with a recovery in crude oil prices. For 2QFY21, revenue rose to RM5.61 billion for the second quarter from RM3.18 billion a year prior.
For the six-month period (1HFY21), cumulative net profit climbed to RM3.32 billion, from RM692 million a year earlier, while revenue grew to RM10.28 billion from RM7.07 billion.
Kenanga Research in a report today noted that PetChem’s “strong 1HFY21 earnings beat expectations”, thanks to higher margin spreads in tandem with higher average product prices.
“Moving forward, we believe some product prices could see tapering off on the back of normalisation of supply after the disruption suffered in 1HFY21, coupled with new waves of capacity additions in the market,” the research house stated.
“Nonetheless, PetChem’s full-year plant utilisation is expected to remain stable at about 94% (flattish year-on-year), while its Pengerang complex is also anticipated to commence within the year,” it added.
Post results, Kenanga Research raised its FY21/FY22 earnings forecasts by 57%/26% for PetChem on the back of higher average product prices and margin spread assumptions.
“Nonetheless, our target price (TP) is slightly reduced to RM8.55 (from RM8.90) as we lowered our ascribed valuation to 16 times FY22E (estimated) price-earnings ratio (PER) (from 21 times previously) — in view that earnings may have peaked for the year given the milder price outlook for certain products,” it said, maintaining its "market perform" call on the stock.
“We feel our ascribed valuation to be well justified as it is broadly in line with the stock’s pre-pandemic mean valuation,” it added.