► TA SECURITIES
A MEMBER OF THE TA GROUP
RESULTS UPDATE
Thursday, August 14, 2025
FBMKLCI: 1,586.60
Sector: Oil & Gas
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Petronas Chemicals Group Bhd (PCHEM): Earnings Miss Amid Weak Spreads and FX Losses
Review
- Petronas Chemicals Group Bhd’s (PCHEM) IHFY25 core net profit of RM45.0mn were below expectations, reaching 10% of our forecast and 14% of consensus estimates. Core net profit excludes RM446mn in forex losses and an impairment loss of RM431mn on Perstorp’s fixed assets. The underlying earnings shortfall was mainly attributable to weaker-than-expected product spreads.
- Olefin and Derivatives (O&D): Revenue declined 15.9% QoQ, mainly due to lower ASP and lower plant utilisation rate (2QFY25: 85.6%, IQFY25: 86.9%), affected by higher plant repair and maintenance activities, resulting in lower production and sales volume. Consequently, EBITDA loss widened to RM251mn from RM43mn in the previous quarter, further pressured by weaker product spreads and an unrealised forex loss from the revaluation of Pengerang Petrochemical Company Sdn Bhd’s (PPC) payables.
- Fertilisers and Methanol (F&M): Revenue fell by 9.4% QoQ, mainly due to a decrease in ASP and lower plant utilisation rate (2QFY25: 72.8%, IQFY25: 97.8%), affected by feedstock supply disruption at PC Fertiliser Kedah and planned shutdowns at PC Methanol and ABF. Consequently, EBITDA declined 37.7% QoQ, weighed down by narrower product spreads.
- Specialties: Revenue fell by 7.2% QoQ as sales volume decreases (2QFY25: 224kMT, IQFY25: 236kMT). However, EBITDA was up from RM52mn to RM153mn, mainly driven by higher contribution margins (2QFY25: 10.1%, IQFY25: 3.2%), supported by sales of emission rights.
Impact
- We cut our FY25/FY26/FY27 earnings forecasts by 42.2%/38.4%/35.4%, factoring in weaker O&D spreads, continued FX headwinds, and ongoing PPC losses despite progress on its Commercial Readiness Testing (CRT). While firmer urea prices in the F&M segment provide some near-term support, persistent oversupply in polyethylene (PE) and monoethylene glycol (MEG) markets and soft downstream demand are expected to keep overall margins under pressure.
Outlook
- Olefin and Derivatives (O&D): Ethylene prices remain under pressure from the start-ups of PRefChem and Lotte Chemical Indonesia, compounded by muted downstream demand. MEG may find some support from balanced supply, though polyester demand stays weak. Polyethylene demand is expected to see little uplift from upcoming Chinese festivals, with ample supply capping prices. Paraxylene outlook stays stable, underpinned by scheduled maintenance in Asia, but flat downstream demand limits upside.
- Fertilisers and Methanol: Urea prices are likely to stay firm on limited availability and strong Indian demand. Ammonia prices are expected to remain stable following SEA plant turnarounds, despite sluggish industrial demand. Methanol market is anticipated to hold steady, supported by balanced supply and limited spot availability.
- Specialties: Residential construction activity is softening, while infrastructure and industrial projects maintain stable growth. Automotive outlook remains cautious amid high interest rates and inventory buildup. Consumer goods demand stays resilient, though uncertainty over global trade and tariffs persists. Overall, oversupply, cost pressures, and tariff impacts continue to weigh on margins.
Valuation
Following our earnings revision, we have lowered our TP to RM3.51/share (previous: RM4.11/share) pegged to 7x CY25 EV/EBITDA with an ESG Premium of 3%. Downgrade from HOLD to SELL.
| Bloomberg Code | PCHEM MK |
| Stock Code | 5183 |
| Listing | Main Market |
| Share Cap (mn) | 8,000 |
| Market Cap (RMmn) | 28,800 |
| 52-wk Hi/Lo (RM) | 6.1/2.75 |
| 12-mth Avg Daily Vol (‘000 shrs) | 5,026.6 |
| Estimated Free Float (%) | 26.4 |
| Beta | 1.5 |
| Major Shareholders (%) | Petronas – 64.4 |
| EPF – 11.7 | |
| ASB – 4.2 |
| FY25 | FY26 | |
|---|---|---|
| Forecast Revision (%) | (42.2) | (38.4) |
| Core Net Profit (RM mn) | 750.4 | 925.4 |
| Consensus | 866.3 | 1308.9 |
| TA/Consensus (%) | 86.6 | 70.7 |
| Previous Rating | Sell (Downgrade) | |
| Consensus Target Price (RM) | 3.48 | |
| % of FY | ||
|---|---|---|
| vs TA | 10 | Below |
| vs Consensus | 14 | Below |
| FY25 | FY26 | |
|---|---|---|
| Net Debt/Equity (x) | Net Cash | Net Cash |
| ROA (%) | 1.3 | 1.5 |
| ROE (%) | 1.9 | 2.4 |
| NTA/Share (RM) | 3.7 | 3.8 |
| P/NTA (x) | 1.0 | 0.9 |
| Price Change (%) | PCHEM | FBMKLCI |
|---|---|---|
| 1 mth | 9.1 | 3.3 |
| 3 mth | (2.4) | 0.3 |
| 6 mth | (12.2) | (0.4) |
| 12 mth | (34.3) | (1.4) |
(12-Mth) Share Price relative to the FBMKLCI
[Chart data not displayed]
Source: Bloomberg
Figure 1: Quarterly Results Analysis
| FYE 31 Dec (RM mn) | 2QFY24 | IQFY25 | 2QFY25 | QoQ (%) | YoY (%) | IHFY24 | IHFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 7,728.0 | 7,656.0 | 6,437.0 | (15.9) | (16.7) | 15,227.0 | 14,093.0 | (7.4) |
| Core EBITDA | 1,492.0 | 824.0 | 714.0 | (13.3) | (52.1) | 2,593.0 | 1,538.0 | (40.7) |
| Depreciation | (529.0) | (611.0) | (608.0) | (0.5) | 14.9 | (1,061.0) | (1,219.0) | 14.9 |
| Net Finance Costs | 64.0 | (1.0) | (1.0) | 0.0 | (101.6) | 111.0 | (2.0) | n.m |
| Associates | (66.0) | (28.0) | (27.0) | (3.6) | (59.1) | (65.0) | (55.0) | (15.4) |
| EI | (21.0) | (97.0) | (1,126.0) | >100 | >100 | 167.0 | (1,223.0) | n.m |
| Pretax Profit | 940.0 | 87.0 | (1,048.0) | n.m | n.m | 1,745.0 | (961.0) | n.m |
| Taxation | (131.0) | (69.0) | 1.0 | n.m | n.m | (233.0) | (68.0) | (70.8) |
| Minority Interest | (32.0) | (36.0) | (34.0) | (5.6) | 6.3 | (67.0) | (70.0) | 4.5 |
| Reported Net Profit | 777.0 | (18.0) | (1,081.0) | >100 | n.m | 1,445.0 | (1,099.0) | n.m |
| Core Net Profit | 798.0 | 79.0 | 45.0 | (43.0) | (94.4) | 1,278.0 | 124.0 | (90.3) |
| Core EPS (sen) | 10.0 | 1.0 | 0.6 | (43.0) | (94.4) | 16.0 | 1.6 | (90.3) |
| DPS (sen) | 1.0 | 0.0 | 3.0 | n.m | >100 | 1.0 | 6.0 | >100 |
| %-points | %-points | %-points | ||||||
| Core EBITDA Margin (%) | 19.3 | 10.8 | 11.1 | 0.3 | (8.2) | 17.0 | 10.9 | (6.1) |
| Core Net Margin (%) | 10.3 | 1.0 | 0.7 | (0.3) | (9.6) | 8.4 | 0.9 | (7.5) |
Figure 2: Quarterly Segmental Analysis
| FYE 31 Dec (RM mn) | 2QFY24 | IQFY25 | 2QFY25 | QoQ (%) | YoY (%) | IHFY24 | IHFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 7,728.0 | 7,656.0 | 6,437.0 | (15.9) | (16.7) | 15,227.0 | 14,093.0 | (7.4) |
| Olefins & Derivatives | 3,768.0 | 3,513.0 | 2,645.0 | (24.7) | (29.8) | 7,513.0 | 6,158.0 | (18.0) |
| Fertilisers & Methanol | 2,126.0 | 2,498.0 | 2,263.0 | (9.4) | 6.4 | 4,120.0 | 4,761.0 | 15.6 |
| Specialties | 1,819.0 | 1,632.0 | 1,514.0 | (7.2) | (16.8) | 3,561.0 | 3,146.0 | (11.7) |
| Others | 15.0 | 13.0 | 15.0 | 15.4 | 0.0 | 33.0 | 28.0 | (15.2) |
| EBITDA | 1,110.0 | 892.0 | 395.0 | (55.7) | (64.4) | 2,270.0 | 1,287.0 | (43.3) |
| Olefins & Derivatives | 330.0 | (43.0) | (251.0) | >100 | n.m | 728.0 | (294.0) | n.m |
| Fertilisers & Methanol | 720.0 | 892.0 | 556.0 | (37.7) | (22.8) | 1,440.0 | 1,448.0 | 0.6 |
| Specialties | 120.0 | 52.0 | 153.0 | >100 | 27.5 | 238.0 | 205.0 | (13.9) |
| Others | (60.0) | (9.0) | (63.0) | >100 | 5.0 | (136.0) | (72.0) | (47.1) |
| %-points | %-points | %-points | ||||||
| EBITDA Margin (%) | 14.4 | 11.7 | 6.1 | (5.5) | (8.2) | 14.9 | 9.1 | (5.8) |
| Olefins & Derivatives (%) | 8.8 | (1.2) | (9.5) | (8.3) | (18.2) | 9.7 | (4.8) | (14.5) |
| Fertilisers & Methanol (%) | 33.9 | 35.7 | 24.6 | (11.1) | (9.3) | 35.0 | 30.4 | (4.5) |
| Specialties (%) | 6.6 | 3.2 | 10.1 | 6.9 | 3.5 | 6.7 | 6.5 | (0.2) |
Figure 3: Earnings Summary
| FYE Dec (RM mn) | 2023 | 2024 | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 28,667.0 | 30,671.0 | 31,901.4 | 33,147.0 | 34,514.1 |
| Core EBITDA | 3,745.0 | 3,907.0 | 3,016.3 | 3,218.2 | 3,436.0 |
| Core EBITDA Margin (%) | 13.1 | 12.7 | 9.5 | 9.7 | 10.0 |
| Pretax Profit | 2,110.0 | 1,690.0 | 874.6 | 1,079.7 | 1,301.8 |
| Reported Net Profit | 1,696.0 | 1,175.0 | 750.4 | 925.4 | 1,115.8 |
| Core Net Profit | 1,693.0 | 1,365.0 | 750.4 | 925.4 | 1,115.4 |
| Core EPS (sen) | 21.2 | 17.1 | 9.4 | 11.6 | 13.9 |
| Core EPS growth (%) | (73.7) | (19.4) | (45.0) | 23.3 | 20.5 |
| Core PER (x) | 17.0 | 21.1 | 38.4 | 31.1 | 25.8 |
| DPS (sen) | 13.0 | 13.0 | 5.0 | 6.0 | 7.0 |
| Dividend Yield (%) | 3.6 | 3.6 | 1.4 | 1.7 | 1.9 |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Scoring | Environmental | Social | Governance | Average |
|---|---|---|---|---|
| Rating | ★★★★★ | ★★★★ | ★★★★ | ★★★★ |
| Remark | Usage of petrochemicals for industrial production (especially automotive, detergents etc.) indirectly leads to degradation of the environment. But systematic environmental policies and measures in place. | Relatively exemplary treatment of employees. Adequate in contributing towards charitable causes. | Copious initiatives to combat corruption within the organization. Board and auditor oversight practices are in place |
★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. +5% premium to target price
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. +3% premium to target price
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. No changes to target price
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. -3% discount to target price
★ (<20%): Minimal or no integration of ESG factors in operations and management. -5% discount to target price
