Petron Malaysia sees unfavourable crack spreads
KUCHING: Petron Malaysia Refining & Marketing Bhd’s (Petron Malaysia) financial year 2023 (FY23) net profit of RM295 million missed Kenanga Investment Bank Bhd’s (Kenanga Research) forecast by eight per cent.
“The variance against our forecast came largely from weaker-than-expected crack spreads. Consensus estimate is unavailable as we are the only research house covering the stock in the market,” it said in its review yesterday.
Year on year (y-o-y), its FY23 revenue fell by six per cent due to lower product market prices, partially mitigated by a higher sales volume of 37.1 million barrels as domestic demand grew.
“Its net profit dropped by a steeper nine per cent mainly due to poor crack spreads.”
On a quarterly basis, its fourth quarter (4QFY23) net profit plunged by 49 per cent dragged by lower sales volume; a lower ASP; and weak refining margins.
“We maintain our FY24 earnings while introducing FY25 numbers,” Kenanga Research said. “Consequently, we maintain our target price of RM4.74 based on unchanged five times FY24 price earnings ratioR, in line with average valuation of its closest peer.”
The research house expect regional crack spreads to remain unfavourable over the immediate term given the increased availability of refining capacity in the market with refineries coming back online aer the recent maintenance cycle, coupled with weak demand for refined products amidst a so global economy.
“Over the longer term, the transition to renewable energy, particularly the adoption of EVs will result in a structural decline in the demand for refined products.”