KUALA LUMPUR (July 23): PETRONAS Chemicals Group Bhd (KL:PCHEM) is expected to record stronger earnings in the second quarter ended June 30, 2026 (2QFY2026), mainly driven by the fertiliser and methanol (F&M) segment, said CIMB Securities.

The research house attributes the spike in earnings to strengthening prices of certain industrial chemicals within the F&M segment, driven by West Asia supply disruptions, regional plant outages, and stronger fertiliser demand from India.

CIMB Securities in a note on Thursday said the price of ammonia have risen by 54.1% quarter-on-quarter (q-o-q), methanol by 56.9%, and urea by 27.9%.

Meanwhile, the olefins and derivatives (O&D) segment should also see stronger earnings from higher ethylene, mono ethylene glycol (MEG), polyethylene(PE), and paraxylene prices.

“Specialty chemicals’ earnings will likely remain mixed, with resilient demand in India and Southeast Asia offset by continued weakness in Europe and China.”

However, the house expects softening prices of the aforementioned chemicals within July to offset 2QFY2026 earnings in 3QFY2026, owing to improvements in supply availability, the easing of geopolitical risk premiums, and subdued downstream demand.

"The O&D segment may also record lower earnings in 3QFY2026 owing to product price normalisation, but the ramp-up in Pengerang Petrochemical Company's (PPC) production starting June 2026 may trim losses from the facility."

Downside risks identified by the house include unplanned plant shutdowns, and weaker-than-expected end-market demand.

“We may turn more bullish should petrochemical spreads structurally improve following rationalisation of global capacity and/or if the disposal of PPC materialises, removing an earnings drag.”

The house maintained its 'hold' recommendation and target price of RM5.45.