KUALA LUMPUR: BIMB Securities Research continue to favor Petronas Chemicals Bhd (PChem) on a longer term perspective for growth potential in specialty chemical space, as the firm believe the upside is limited amid current downcycle in petrochemicals.
Earnings-wise, PChem’s fourth quarter ((4Q) financial year (FY) 2020 profits more than doubled to RM577 million mainly due to improving product spread.
Revenue declined by 9 per cent year-on-year (yoy) to RM3.8 billion due to weaker average selling price (ASP) and sales volume.
However, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved to 32 per cent as compared to 16 per cent in 4Q FY19 on lower maintenance and feedstock costs.
On quarter-on-quarter (qoq) basis, earnings are flattish as it was impacted by large losses at joint venture (JV)/associate line due to cessation of Butanediol (BDO) complex.
The BDO complex was ceased due to overcapacity concern from new supply of coal-based BDO production.
Further, the research firm noted that Pengerang Integrated Complex (PIC) start-up is further delayed to the second half (2H) of 2021 due to integration issues.
While product prices are still rising upwards, we remain wary of potential new supply from the US as well as China’s self-sufficiency target which could limit further upside to the average selling price (ASP).
BIMB Securities maintain Sell call for PChem with unchanged target price of RM5.50.