Review

• Petronas Dagangan Berhad’s (PETDAG) 1HFY23 core net profit of RM580.5mn (+101.0% YoY) came in above expectations at 72% of ours and 62% of consensus’ full-year forecasts. The positive variance was mainly due to better-than-expected margins for Commercial segment.

• The group declared a second interim dividend of 18.0sen/share (2QFY22: 11.0sen/share), bringing the YTD DPS to 33sen (1HFY22: 16sen).

• YoY: 2QFY23 revenue decreased 6.2% YoY driven by lower ASP (-14% YoY) which more than offset the volume growth (+9% YoY). PBT surged 18.9% YoY on the back of higher gross profit from Jet A1 and Diesel in the Commercial segment following stability in the prices’ trend. Note that Commercial segment reported operating profit of RM139.6mn compared with operating loss of RM1.1mn in 2QFY22.

• QoQ: Revenue grew 3.1% QoQ supported by volume growth (+6% QoQ) but PBT dropped 8.2% QoQ as a result of higher maintenance costs and marketing expenditure.

• 1HFY23: PBT soared 58.6% YoY mainly contributed by revenue growth (+2.6% YoY) and higher gross profit from Commercial segment supported by stability in the prices’ trend. Note that effective tax rate was 25.6% in 1HFY23, lower than 27.2% in 1HFY22, which we attribute to the absence of one-off prosperity tax.

Impact

• No change to earnings forecasts pending analyst briefing later today.

Outlook

• We expect PETDAG’s sales volume to continue registering steady growth in the coming quarters on the back of strong domestic economy. Commercial segment should also see volume growth mainly driven by growth in air passenger traffic. Nonetheless, we believe there will be higher operating expenditure in the form of advertising expenses which may impact the group’s bottomline growth.

• Overall, we expect YoY earnings growth in the coming quarters mainly from the absence of one-off prosperity tax.

Valuation

• Maintain Buy recommendation with unchanged target price of RM26.70/share based on of 33x CY23 EPS, which corresponds with its average 3-year historical mean.

Source: TA Research - 29 Aug 2023