KUALA LUMPUR: Hong Leong Investment Bank (HLIB) has cut Petronas Chemicals Group Bhd's earnings forecasts for fiscal years (FY) 2024 and 2025 by 25 per cent.
The firm said this was after it imputed lower earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the Olefins and Derivatives (O&D) segment.
HLIB research maintained a Sell call on Petronas Chemicals with a lower target price of RM5.09, from RM6.04 previously.
The firm said Petronas Chemicals' FY23's core earnings of RM1.77 billion, came in below its own (82 per cent) and consensus' expectations due to unexpected losses from O&D segment in 4Q23.
Petronas Chemicals' core net profit fell 61 per cent quarter-over-quarter (QoQ) as the O&D segment reported a loss after tax of RM95 million due to weaker sales volume caused by lower utilisation rate, higher maintenance costs and lower product spreads.
"However, it was mitigated by stronger fertilisers and methanol division thanks to improved utilisation rate that gave rise to better sales volume as well as increased product spreads thanks to higher urea and methanol prices," said the research house in a note today.
Furthermore, HLIB research said the Polyethylene (PE) and polypropylene prices have so far remained muted in 2024 despite the Lunar New Year due to limited restocking activities in China as players refrained from building up inventories given its bleak demand outlook.
"Nonetheless, we reiterate our view that polyolefin prices have likely bottomed out as sellers are resisting further discounts. "PE prices are expected to stabilise ahead of the Eid celebration," it added.
Hong Leong Investment Bank in a note said barring unplanned shutdowns and supply chain disruptions, management aims to achieve 90 per cent overall utilisation in 2024 with the planned turnarounds such as Fertiliser Kedah for 50 days in 1Q24, Methanol 1 for 60 days in 2Q24, Ethylene's gas cracker starting in September for 55-60 days and Asean Bintulu Fertiliser in 4Q24 for 60 days.
Pengerang IPC is expected to achieve commercial operational date in 2Q24 as Petronas Chemicals goes through a test run for the remaining three plants."