PETDAG: Interim Results Meet Expectations, Target Price Adjusted Upwards Amidst Persistent ‘Sell’ Call

Petronas Dagangan Berhad (PETDAG) reported its Interim Half-Year 2025 (IHFY25) core net profit of RM564 million, a performance that aligned with both TA Securities’ and consensus’ full-year estimates, representing 53% and 51% respectively. The group further declared a second interim dividend of 22 sen per share, bringing total IHFY25 dividends to 42 sen per share, with a dividend payout ratio of 75%.

Performance Review

Despite meeting expectations, the group’s revenue saw an 8% year-on-year (YoY) decline, primarily driven by a 7% YoY drop in average selling price and a 1% YoY reduction in sales volume. This translated into a 6% YoY decrease in pre-tax profit (PBT) due to lower gross profit.

The retail segment emerged as a significant drag on overall performance, experiencing a 7% YoY revenue decline due to reduced sales volume from diesel and mogas. This segment’s PBT consequently fell by 23% YoY, attributed to less favorable MOPS price trends and sustained reduction in demand.

Conversely, the commercial segment provided a partial cushion, reporting a 9% YoY increase in PBT. This positive performance was primarily fueled by higher demand for Jet A1 and commercial diesel, which saw a 12% YoY surge. The segment’s PBT was also supported by lower operating expenses, despite a 7% YoY revenue decline from merchandise sales.

On a sequential quarter-on-quarter (QoQ) basis, group revenue remained relatively flat with a marginal 0.3% decline. An increase in sales volume of 5% QoQ largely offset a 5% QoQ drop in average selling price. However, PBT saw a 9% QoQ decline, mainly due to higher operating costs.

Future Outlook and Challenges

Looking ahead, the anticipated RON95 subsidy rationalisation, slated for implementation by year-end, is initially expected to have only a mild impact on sales volumes, as it is projected to be limited to the T15 household income group.

However, TA Securities highlights significant regulatory risks. There is a potential for the government to expand the scope of RON95 subsidy retargeting beyond the T15 group. Such a move, particularly if coupled with the broader transition towards cleaner transportation modes like electric vehicles and public transportation, could structurally impact PETDAG’s valuation multiples. The report also notes that the current large-scale fuel subsidies present a challenge should the government intend to introduce carbon pricing for the sector in the future.

TA Securities maintained its “Sell” recommendation for PETDAG. The target price has been tweaked higher to RM19.60 (from RM19.10 previously) as the valuation base is rolled over to FY26F, pegging the company to its long-term mean PER of 18x.