Petronas Chemicals’ 2HFY18 earnings to be weaker
KUALA LUMPUR: Petronas Chemicals Group Bhd’s (Petronas Chemicals) second half of financial year 2018 (2HFY18) earnings have been projected by analysts to be weaker but some believe that interest on petrochemical companies such as the group itself will remain strong.
AmInvestment Bank Bhd (AmInvestment Bank) maintained its Petronas Chemicals’ FY18FFY20F earnings as the group’s first quarter of FY18 (1QFY18) core net profit of RM1.218 billion generally came in within expectations.
Petronas Chemicals’ core net profit accounted for 28 per cent of AmInvestment Bank’s FY18F earnings and 30 per cent of consensus, versus 19 per cent-31 per cent for 1QFY15- FY17 against their respective years.
“We highlight that our FY18F-
We highlight that our FY18F-FY20F earnings are eight to nine per cent above consensus.
FY20F earnings are eight to nine per cent above consensus,” the research firm said.
As AmInvestment Bank had highlighted in its 4QFY17 results update, the group’s 1HFY18 results are likely to be strong with high plant utilisation rates (PUR) with only one minor plant maintenance in 2QFY18.
“However, 2HFY18 earnings could soften as four plants, which include the ethylene cracker, methanol and Asean Bintulu Fertiliser plants, will undergo turnaround activities that could lower the 1QFY18 utilisation rate of 100 per cent to an overall FY18F rate similar to 91 per cent in FY17.”
On a similar note, the research arm of Kenanga Investment Bank Bhd highlighted that although the first quarter of 2018 (1Q18) net profit of RM1.11 billion made up 26 per cent and 27 per cent of house and street’s FY18 estimates, respectively, it considered this to be within expectations.
This was given that earnings were expected to come off in the next two quarters with five scheduled turnaround activities in the next three quarters as opposed to 100 per cent utilisation in 1Q18, Kenanga Research also noted.
“While we expect earnings to weaken in the coming quarters due to turnaround activities, interest on petrochemical companies like Petronas Chemicals, will remain strong given the recovery in oil prices,” the research arm said.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) remained “sanguine” on the company.
MIDF Research noted that while the group’s overall PUR will be under stress owing to heavy turnaround activities, management still expects total product volume output to be above 10,000 metric tonnes (MT), comparable with that of FY17.
“In addition, management also expects profits to be on par with FY17 premised on strong demand, strong asset reliability albeit softening product prices,” it said.
AmInvestment Bank