Petronas Chemicals Group Bhd (PetChem) continues to face pressure on its earnings outlook, as Maybank Investment Bank Research (Maybank IB) maintains a “sell” recommendation on the counter, with an unchanged target price of RM2.59. This stance reflects the research house’s sustained bearish view on the olefins and derivatives (O&D) subsector.
According to Maybank IB, the group’s prospects remain subdued due to persistent oversupply in the regional O&D market. This glut is largely attributed to China’s ongoing efforts to achieve self-sufficiency in petrochemical production, which has continued to dampen market spreads.
Maybank IB expects O&D spreads to remain weak in the second half of 2025. However, the research house is closely monitoring any industry signals of major capacity rationalisation, which could signal a potential turning point for the sector, particularly as many naphtha-based petrochemical producers remain in a loss-making position.
In addition to structural market headwinds, foreign exchange volatility is likely to exert further pressure. The 5% depreciation of the US dollar against the ringgit in the second quarter of 2025 to RM4.21 may result in unrealised foreign exchange losses for PetChem. This would stem from the revaluation of shareholder loans extended to Pengerang Petrochemical Company (PPC), along with the revaluation of PPC’s payables.
Maybank IB anticipates weaker quarter-on-quarter core earnings for PetChem in 2Q25. This projection takes into account the temporary shutdown of Pengerang Refining Co Sdn Bhd and Pengerang Petrochemical Sdn Bhd, alongside continued weakness in O&D spreads.
-The Star
