KUALA LUMPUR, Nov 3 ― Kenanga Research has upgraded Petronas Chemicals Group Bhd to “Market perform” from “Underperform”, and raised its target price by 16 per cent to RM7.20 from RM6.20 previously.
The research outfit liked the company due to signs of bottoming of polyolefin prices supported by crude prices; specialty chemicals division potentially seeing trough earnings in financial year 2023 with poised to be a year of gradual recovery; and its superior margins versus its peers due to a favourable cost structure.
However, it said the upside to its earnings and hence share price is capped by the limited upside to its product prices amid a tepid global economic outlook.“We cut our FY2023 earnings forecast by seven per cent as we lower our plant utilisation assumption to 89 per cent but raise our FY2024 earnings by eight per cent to reflect a higher urea price assumption of US$350 per tonne for FY2023 and US$400 per tonne in FY2024,” it said.
Kenanga said risks to its call include worse-than-expected economic growth globally leading to weaker petrochemical prices; costs at the Pengerang Integrated Complex exceeding estimates due to operational issues; and worse-than-expected oversupply in specialty chemicals particularly in the European region.Advertisement
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