Petron Malaysia (Petron) reported a net profit of RM4.6m, declining by -65.0% QoQ and -94.4% YoY due to weaker sales volume to 9.2MM bbl (-7% YoY), following the implementation of the retail diesel targeted subsidy in June 2024 and lower export sales. Meanwhile, 9MFY24 recorded net profit of RM87.6m is lower by 62%. Regional refineries are likely to continue experiencing margin compressions due to on-going structural decline in fuel demand, driven by the increasing adoption of electric vehicles. Given the challenging growth prospects, we are ceasing our coverage on Petron as part of an internal exercise to reallocate resources to broaden coverage in other areas. We are also formalizing the temporary cessation of coverage in place since 2018. Our last call was Neutral with TP of RM8.61 (dated 25 May 2018).

• Revenue dropped by -21.4% YoY due to 7% lower sales volume to 9.2 MM bbl amid weak domestic fuel demand following to the implementation of targeted diesel subsidy in June 2024. Export sales also declined from reduced refinery production. Nonetheless, the commercial volume increased by 9%, driven by jet fuel and LPG. The dropped in revenue also aggravated by lower benchmark price as Brent crude oil fell sharply by 18% from USD90/bbl in April to USD74/bbl by end of September.
• Net profit significantly dropped by -94.4% YoY basis as the margin contraction persisted amid lower sales volume and weaker benchmark price. Petron recorded a very thin gross profit margin of 1% in 3QFY24 against 4.9% in 3QFY23.

Source: PublicInvest Research - 22 Nov 2024