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MIDF Sector Research

Author: sectoranalyst   |   Latest post: Fri, 6 Dec 2019, 5:43 PM

 

Petronas Chemical Group Berhad - Commendable Overall PUR of 81% Despite Heavy TA

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KEY INVESTMENT HIGHLIGHTS

  • Petronas Chemicals Group Bhd’s 3QFY19 reported profit of RM553.0m came in broadly in-line
  • Revenue and earnings impacted by heavy TA and subdued product prices due to weak crude oil price
  • Commendable overall group PUR of 81% recorded in 3QFY19
  • Differentiated and specialized products to cushion the impact from subdued product prices
  • Maintain BUY with an unchanged TP of RM8.77 per share

Earnings broadly within expectations. Petronas Chemicals Group Bhd’s (PChem) 3QFY19 earnings came in at RM553.0m. This brings its 9MFY19 cumulative earnings to RM2,475.0m which we deem as broadly in-line and with ours and consensus’ expectations at 68.1% and 68.6% respectively. Revenue during the quarter contracted by -24.0%yoy and - 15.4%qoq mainly due to the heavy turnaround activity that took place during the quarter which has resulted in lower production. Correspondingly, earnings during the quarter declined by -56.0%yoy and -50.6%qoq due to the lower revenue recorded during the quarter.

Commendable overall PUR of 81% recorded in 3QFY19. The dip in PChem’s revenue and earnings during the quarter were expected as Management has guided that 3QFY19 will be the quarter with the heaviest statutory turnaround (TA) activity. Recall that, TA activity was undertaken on PC Olefin, Glycol & Derivative (PCOGD) in Kerteh, Terengganu for a period of 50days in 3QFY19. That said, the group’s recorded an overall PUR of 81%; higher than the same period last year which was at 79%. There is however; a double whammy impact on the group’s revenue and earnings coming from not only the heavy TA but also the subdued product prices during the quarter mainly due to the weak movement of crude oil price.

Olefins and Derivatives. The segment reported a lower PUR rate of 78% (vs 96% in 3QFY19) during the quarter attributable to the TA activity undertaken on its PCOGD. As a result, sales volume was lower in-line with the lower production which resulted in revenue and earnings declining by -27.9%yoy and -69.9%yoy respectively. The lower product prices and sales volume were partially negated by weaker Ringgit against USD during the quarter.

Fertilisers and Methanol. The segment recorded an improved PUR of 83% during the quarter vs 69% in the same period last year due to lower TA activity. This has resulted in increased sales volume in-line with higher production during the quarter. However; the increase was negated also by the subdued product prices with revenue and earnings registering a decline of -18.1%yoy and -26.2%yoy respectively.

Source: MIDF Research - 14 Nov 2019

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