• Overview. Petronas Dagangan (PetDag) 2Q22 net profit jumped to RM238mn mainly due to a one-off gain amounted to RM88mn from the disposal of LPG business in Sarawak to PETROS. Excluding this non-core item, core profit rose by 23% QoQ and 89% YoY to RM155mn. Total sales volume grew 12% QoQ and 36% YoY to 3.8bn litres driven by pent-up demand amidst full economic reopening. This is also notably at par with the average volume prior to pandemic.

• Key highlights. The PBT from retails segment grew by 5% QoQ at RM224mn with a stable PBT margin of 5% (1Q22: 5.6%). Meanwhile, commercial segment recorded loss before tax of RM1.1mn.

• Against estimates: Below. 1H22 core profit was largely flattish at RM281mn despite higher sales volume by 28% YoY to 7.3bn litres (1H21: 5.7bn litres). This is below our expectation at 33% of our full year earnings forecast but within consensus’ estimate at 47%. The deviation against our forecast stems from lower profit margin amidst higher product cost. As such, we cut our FY22F/FY23F/FY24F forecast by 20% /10%/11% to RM679mn/RM815mn/RM897mn as we assume a lower profit margin.

• Dividend. A 2 nd interim DPS of 11sen was declared which is higher than 2Q21 DPS of 10sen. This brings YTD DPS to 16sen (1H21: 24sen) which implies a payout ratio of 43%.

• Outlook. Despite earnings downgrade, we still expect some earnings respite in 2H22 as the effect of higher product cost could normalise.

• Our call. We maintain a HOLD call on PetDag with a lower DCF-derived TP of RM21.50 (from RM23.60). This implies 26x FY23F P/E (Table 4).

Source: BIMB Securities Research - 25 Aug 2022