PCHEM’s 1HFY22 results met expectations, underpinned by improved product prices amidst higher oil prices, partially offset by lower plant utilisation due to turnaround and maintenance activities. We expect higher plant utilisation in 2HFY22 in the absence of major maintenance activities. Maintain our forecasts, TP of RM11.00 based on 11x FY23F PER and OUTPERFORM call.
1HFY22 within expectations. Its 1HFY22 core net profit of RM3,731m came in within expectations at 53% of our full-year forecast and 49% of the full-year consensus estimates.
Quarterly dip in utilisation. 1HFY22 saw core earnings jump 17% YoY, thanks to higher product prices in tandem with the improved crude oil prices amidst tight supply. This more than offset lower production volumes amidst lower plant utilisation (79% vs 94%) due to plant maintenance activities.
Plant utilisation expected to normalise. We expect its plant utilisation to normalise in 2HFY22 in the absence of major maintenance and plant turnaround activities. With that, we expect full-year FY22 plant utilisation to average at >90%. Meanwhile, product prices have eased since 2QFY22 amidst slowing demand and while there are concerns over the global economy slipping into a recession, we firmly believe product prices will remain elevated compared against levels in 2020- 2021.
We continue to like PCHEM as a beneficiary of the elevated crude oil price environment. Given its arrangement with Petronas, PCHEM benefits a more favourable feed-cost structure, while peers may be hampered by the volatile input costs. Additionally, PCHEM also enjoys dominant market share regionally, which is further cemented by the start-up of its Pengerang complex – increasing its capacity by ~15%.
Maintain our forecasts and TP of RM11.00 based on 11x FY23F PER, in-line with large petrochemical players in the region. There is no change to our TP based on ESG for which it is given a 3-star rating as appraised by us (see Page 4).
Risks to our call include: (i) volatile fluctuations in petrochemical product prices, and (ii) unscheduled plant maintenance, hurting utilisation.
Source: Kenanga Research - 23 Aug 2022
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