KUALA LUMPUR (Aug 20): Research houses remain cautious on PETRONAS Chemicals Group Bhd (KL:PCHEM), despite swinging to a profit in the second quarter, with at least one viewing earnings as having peaked.
"We view 2QFY2026 (the second quarter ended June 30, 2026) as the peak earnings quarter, driven by an exceptional spike in key petrochemical prices amid the closure of the Strait of Hormuz," TA Securities said in a note on Thursday. The research house maintained its 'sell' call on the stock, with a target price of RM4.32.
TA Securities said while fertiliser and methanol prices, particularly urea, should remain supported by food security requirements, upcoming planting seasons and China's export controls, it sees limited scope for a repeat of the sharp price uplift in 2QFY2026.
"Meanwhile, O&D (olefins and derivatives) prices are likely to face greater pressure from subdued downstream demand and structural oversupply," it added.
Meanwhile, Hong Leong Investment Bank (HLIB) and CIMB Securities both trimmed their target prices in separate notes following the results to RM5.49 and RM5.00 respectively. HLIB kept its 'buy' call while CIMB Securities’ 'hold' call was unchanged.
PETRONAS Chemicals reported a net profit of RM414 million in 2QFY2026. Revenue rose 12.7% quarter-on-quarter to RM7.9 billion, buoyed by higher average selling prices which cushioned weaker sales volumes.
HLIB said PETRONAS Chemicals' first-half core earnings accounted for 42% of both its and consensus full-year forecasts, with the shortfall mainly due to lower plant utilisation amid turnaround activities. The house also cut its FY2026 earnings forecast by 22% to factor in lower utilisation of the O&D segment.
CIMB Securities likewise cut its FY2026 earnings forecast by 18% to reflect lower product spreads after the O&D segment's margins missed expectations. The house also lowered its forecasts by 9% for FY2027 and 6% for FY2028 on more conservative margin assumptions for both the O&D and F&M segments.
CIMB Securities expects a stronger quarter in 3QFY2026, as major turnarounds at the Kertih Integrated Petrochemical Complex have been completed. The PC Olefins cracker remains offline due to operational issues.
“Plant utilisation is expected to be at 80% to 85% in 3QFY2026 despite the 60-day PC Methanol Plant 2 shutdown, 10-day PC Fertilizer Sabah shutdown, and PC Olefins remaining offline,” CIMB Securities said. “With no major turnarounds in 4QFY2026, utilisation should recover to 93%, bringing FY2026 utilisation to 85%,” the house added.
Shares of PETRONAS Chemicals were down 10 sen or 2% to RM4.59 at the time of writing on Thursday, valuing the company at RM36.7 billion.