KUALA LUMPUR (June 23): PETRONAS Chemicals Group Bhd’s (KL:PCHEM) results for the second quarter ending June 30, 2026 (2QFY2026) will likely show stronger earnings, but Maybank Investment Bank cautioned the gains may prove temporary as selling prices have retreated from their April-May peaks.

The research house downgraded PETRONAS Chemicals to 'sell' from 'hold' and cut its target price by 30% to RM3.92 from RM5.62, implying an 8% downside from the stock’s reference price of RM4.27.

Maybank also reduced its core net profit forecast for FY2026 by 31% to RM2.07 billion from RM3 billion, citing lower plant utilisation, weaker margins and declining urea prices.

“Both olefins and derivatives and fertilisers and methanol average selling price peaks are in our rear-view mirror,” Maybank analyst said in a report on Tuesday.

Product prices are expected to normalise in the coming quarters due to weaker demand and easing supply-chain disruptions, while China continues to add petrochemical production capacity, albeit at a slower pace following the Middle East tensions.

Maybank said the recent event-driven petrochemical “supercycle” was fading, raising the risk of a de-rating as PETRONAS Chemicals’ earnings growth tapers off.

The research house cut its assumed earnings before interest, taxes, depreciation and amortisation margin for PETRONAS Chemicals’ olefins and derivatives division to 20% from 25%, while lowering the segment’s utilisation rate assumption to 88% from 95%.

The weaker assumptions reflect scheduled maintenance at several plants, particularly a major turnaround at the Kertih integrated petrochemical complex involving multiple production facilities.

Other scheduled maintenance includes the Asean Bintulu Fertiliser plant, PETRONAS Chemicals Methanol Plant 2 and PETRONAS Chemicals Fertiliser Sabah.

PETRONAS Chemicals' core net profit is projected to fall by 53% to RM985 million in FY2027 and decline by a further 55% to RM440 million in FY2028 as product spreads continue to narrow.

Revenue is forecast to rise 9.8% to RM30.17 billion in FY2026, before falling to RM27.93 billion in FY2027 and RM25.99 billion in FY2028.

Maybank, however, said a potential disposal of PETRONAS Chemicals' 50% stake in Pengerang Petrochemical Company Sdn Bhd (PPC) could pose an upside risk to its recommendation.

Petroliam Nasional Bhd (PETRONAS) is acquiring Saudi Aramco’s stake in the Pengerang Refining Company Sdn Bhd and PPC joint ventures. Following the transaction, PPC will be equally owned by PETRONAS and PETRONAS Chemicals.

Should PETRONAS subsequently acquire PETRONAS Chemicals' remaining stake in PPC, the disposal could remove PETRONAS Chemicals' largest source of earnings drag and boost its annual profit by about RM1 billion, Maybank estimated.

At 10.30am on Tuesday, PETRONAS Chemicals' shares were down 40 sen or 9.4% at RM3.87, valuing the group at RM31.0 billion.