INVESTMENT HIGHLIGHTS

• Petronas Chemicals Group Bhd’s (PChem) 3QFY18 earnings expanded by +37.7%yoy to RM1.26b

• 9MFY18 PUR sustained at 91% due to good feedstock and asset reliability

• Product volume growth of +5%yoy

• Average product prices increased on strengthening global crude oil prices

• Maintain BUY with unchanged TP of RM10.23 per share

Sustained 9MFY18 PUR at 91% despite turnaround activities. PChems’ 3QFY18 earnings expanded by +37.7%yoy to RM1.26b. The commendable profit is premised on strong revenue growth of +20.4%yoy to RM4.83b. The upbeat sales figures are a result of: (i) stronger crude oil price and; (ii) higher average selling prices (ASP). Product volume declined by -8.8%yoy to 2,249MT for 3QFY18 compared with 2,466MT in 3QFY17 due to the turnaround (TA) activities. However, annual production volume is forecasted to be above 10,000MT per annum for FY18.

Earnings within estimates. 9MFY18 normalised earnings (excluding loss of partial divestment of subsidiary and forex losses) met our and consensus expectations at 86% and 85% of FY18 full year earnings estimates respectively. Overall PATAMI margin sustained at a healthy level of 26% for the quarter.

Olefins & derivatives. 3QFY18 segment revenue and profit grew by +21.1%yoy and +13.3%yoy respectively. Segment PUR was at 96% while average product prices increased by +20% in-line with strong crude oil prices. Ethylene production for the quarter was at 225kMT(flat yoy) due to maintenance works conducted at PC Olefin.

Fertilisers & Methanol. Both segment revenue and profit grew by +13.2%yoy and by +14.7%yoy respectively due to (i) higher average product prices from higher crude oil prices and; (ii) stronger MYR against USD during the quarter. However, plant utilisation was lower at 69% during the quarter due to planned turnaround activity undertaken at both its urea and methanol plants. Hence, urea production dipped to 421kMT (-27.7%yoy) while methanol production declined to 356kMT (-38.4%yoy).

Source: MIDF Research - 19 Nov 2018