KUALA LUMPUR (Nov 21): Petronas Chemicals Group Bhd (KL:PCHEM) may be in for tougher days ahead following a massive paper loss that sent the company into the red for the first time ever and prompted analysts to cut their forecasts.
At least one analyst downgraded the stock. Shares of Petronas Chemicals hovered around their lowest levels in four and a half years following last week's sharp decline ahead of the results announcement. The stock was up 11 sen or 2% to RM4.68 at 11.15am on Thursday, valuing the company at RM37 billion.
"We revised our earnings forecast downwards to accommodate the unrealised forex loss with the expectation that the loss will gradually be offset in the near term,” MIDF Amanah Investment Bank said, but cautioned that the loss could prolong until early 2025.
The research house lowered its rating to “neutral” from “buy” after slashing its earnings forecast for 2024 by 49% and cutting the target price by 35% to RM4.89.
Shares of Petronas Chemicals have lost more than one-third of their value so far this year while the petrochemical industry grapples with thinning refining margins. The ringgit, meanwhile, appreciated sharply against the US dollar before easing in early October.
Petronas Chemicals’ foreign exchange loss alone in the July-Sept quarter totalled RM1.1 billion.
“Sell” calls for Petronas Chemicals now outnumber “buy” recommendations. The consensus’ 12-month target price has also fallen nearly 13% to RM5.01 from three months ago, according to Bloomberg.
Maybank Investment Bank, which now has the second-lowest target price for the stock at RM3.82, flagged that the inclusion of losses from its Pengerang Petrochemical Company Sdn Bhd (PPC) would lead to a profit contraction for Petronas Chemicals in 2025 even as overall product spreads improve.
“We view that [the] worst is not over for the industry for now,” the research house said in keeping its “sell” call, noting that valuations are also rich at 21 times its projected earnings for 2025.
PPC, a 50:50 joint venture with Saudi Aramco, resulted in loss on revaluation of payables of RM536 million as PPC mainly conducts its business in US dollars. Petronas Chemicals also booked a RM492 million loss on US dollar-denominated shareholders loan to PPC.
Net loss for the quarter ended Sept 30, 2024 (3QFY2024) was RM789 million, according to an exchange filing. The company said it would have made an estimated profit after tax of RM352 million without the foreign exchange loss.