PetChem to gain from high prices

PETALING JAYA: Petrochemical market conditions are expected to remain volatile over the near term, but prices of key petrochemical products are likely to remain elevated relative to pre-conflict levels throughout this year.

TA Research said this will be supported by ongoing supply disruptions around the Strait of Hormuz, and China’s export controls, which continue to tighten regional supply dynamics.

The research house said PETRONAS Chemicals Group Bhd (PetChem) reported a first quarter ended March 31 (1Q26) core net profit of RM216mil, representing 18% of its full-year forecast and 11% of consensus estimate.

“We deem the results broadly within expectations, as we continue to anticipate a stronger performance in 2Q26 amid persistent supply disruptions across key petrochemical markets, which are supporting product pricing and spreads,” it said.

PetChem’s net profit for 1Q26 was RM401mil after a few consecutive quarters in the red, while revenue fell 8% year-on-year to RM7.02bil.

TA Research noted that under the olefin and derivatives segment, revenue rose 4.7% quarter-on-quarter (q-o-q), largely due to higher average selling prices (ASP) and improved sales volume (4.1% q-o-q), partially offset by lower plant utilisation rate, following planned maintenance activities at the PETRONAS Chemicals MTBE Sdn Bhd facility.

It added that loss before interest, taxes, depreciation, and amortisation narrowed to RM91mil from RM600mil in the previous quarter and the sequential improvement was primarily attributable to stronger average product spreads, lower plant operating costs and reduced unrealised foreign exchange loss at Pengerang Petrochemical Co.

For fertilisers and methanol (F&M), it noted that revenue increased by 3% q-o-q, supported by firmer ASPs and a higher plant utilisation rate. It has upgraded its recommendation from a “hold” to “buy”, with a target price of RM6.56. The stock closed at RM5.70 last Friday.

RHB Research, which upgraded the stock to a “neutral” from “sell” with a new target price of RM5.92, said in a report that PetChem’s 1Q26 results came in above its expectations, but below consensus’.

The group’s earnings outperformance against its estimates was mainly driven by stronger-than-expected product spreads, particularly within the F&M segment, alongside lower operating costs and improved operational performance.

It said while operating conditions remain volatile, product prices are expected to stay elevated.