PChem shares fall 6.39 per cent amid analysts downgrades

KUALA LUMPUR, Nov 29 (Bernama) -- Shares of Petronas Chemicals Group Bhd (PChem) were lower in the mid-morning session after several analysts cut ratings, citing expected lower margins and an uncertain 2023 outlook following lower net profit in the third quarter ended Sept 30, 2022 (Q3 FY2022).

At 3.01 pm, PChem emerged among Bursa Malaysia's top losers falling as much as 6.39 per cent or 58 sen to RM8.50, with 7.93 million shares changing hands.

Last Friday, PChem said its net profit for Q3 FY2022 slipped to RM1.90 billion from RM1.96 billion in the same quarter last year due to softer margins and lower contributions from joint ventures and associates.

Revenue rose 22 per cent to RM7.03 billion from RM5.77 billion previously on the back of higher average product prices amid a stronger US dollar, coupled with improved production and sales volumes.

Hong Leong Investment Bank downgraded the company to hold from buy and cut its target price (TP) to RM9.20 from RM11.76 since its profits could peak this year and decline in 2023 given the imminent normalisation in product spreads.

"We strongly believe that the petrochemical upcycle is now behind us as product spreads are seen to be coming off their respective peaks.

"We advise investors to lock in profits and embrace the likely outcome of a petrochemical bear cycle in 2023," its analyst said in a note today.

CGS-CIMB downgraded its hold recommendation to a reduce with a lower TP of RM8.37 as it expects its core earnings per share (EPS) in full financial year 2023 (FY23F) to fall 15 per cent year-on-year (yoy) and for FY24F core EPS to decline by six per cent.

CGS-CIMB analyst said its nine months ended Sept 30, 2022 (9MFY2022) core net profit of RM5.56 billion was below expectations, at 67 per cent of its previous full-year forecast versus 78 per cent of Bloomberg’s. This was due to weaker-than-expected profits at its olein and derivatives (O&D) and fertilisers and methanol (F&M) divisions as selling prices softened more than expected in Q3 2022.

“Both the O&D and F&M segments saw lower quarter-on-quarter (q-o-q) average selling prices due to weaker consumer demand for plastics amid the global cost-of-living crisis and weak polyester industry demand,” it said.

-- BERNAMA