PETDAG: Commercial Segment Strength Drives FY25 Results, Target Price Adjusted Upward
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM20.90 (-2.3%) |
| Last Traded | RM21.40 |
| Recommendation |
Petronas Dagangan Berhad (PETDAG) concluded its financial year 2025 with results largely aligning with consensus estimates and slightly surpassing the investment bank’s own expectations, primarily driven by stronger-than-anticipated margins. The group reported a core net profit of RM1.12 billion for FY25, marking a 0.5% year-on-year increase. Its fourth quarter of FY25 saw a core net profit of RM271 million, an 8.6% year-on-year rise, contributing 106% to TA Securities’ full-year forecast and 99% to consensus estimates.
Performance Drivers and Challenges
The robust performance was significantly bolstered by the commercial segment, which demonstrated an impressive 84% year-on-year improvement in earnings. This was attributed to higher gross profit from increased volume off-take (+12% YoY) and the beneficial “lag effect” of cost-to-contract price adjustments during a period of declining crude oil prices. This segment’s improved margins partially offset weaknesses elsewhere.
In contrast, the retail segment experienced a 42% year-on-year earnings decline, primarily due to higher operational expenditures and less favourable movements in MOPS (Means of Platts Singapore) prices. The convenience segment also faced a 26% year-on-year earnings contraction, stemming from lower merchandise sales and compressed margins. Sequentially, overall group operating profit declined by 5% quarter-on-quarter, impacted by these segmental weaknesses but somewhat mitigated by better gross margins in the commercial segment.
TA Securities has revised its FY26F-27F net profit forecasts upwards by 5-7%, citing more aggressive margin assumptions, and has introduced an FY28F net profit forecast of RM1.19 billion.
Future Outlook and Regulatory Considerations
Near-term earnings are expected to remain stable, supported by improved consumption due to the government’s relaxed fuel subsidy policy, although this could be partially offset by softening automotive sales. Stabilising crude oil prices are also anticipated to contribute to the normalisation of commercial segment margins.
However, the longer-term outlook presents regulatory risks. The potential expansion of the RON95 subsidy retargeting scheme to a broader consumer base could impact sales volumes. Furthermore, the existing fossil fuel subsidy policy is seen as contradictory to the national drive towards decarbonisation and cleaner transportation modes, such as electric vehicles. The increasing fragmentation of the EV charging market compared to traditional fuel retailing could structurally impact future valuations.
Despite the upward revision in target price to RM20.90 (from RM19.60 previously), TA Securities maintains its “SELL” recommendation, citing valuation based on a long-term mean PER of 18x for PETDAG’s FY26F core EPS. The current target price implies a 2.3% downside from the last traded price of RM21.40.
