Petronas Chemicals on track to a record high for FY21, says HLIB

Petronas Chemicals on track to a record high for FY21, says HLIB
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KUALA LUMPUR (Oct 14): Hong Leong Investment Bank (HLIB) Research has upgraded Petronas Chemicals Group Bhd (PetChem) to “buy” at RM8.75 with a higher target price (TP) of RM10.65 (from RM8.75), and said it expects strong earnings delivery from PetChem in the second half of 2021 (2H21), uplifted by both: (i) firm product spreads for its O&D segment, which can be seen from stable polyethylene product prices (HDPE, LDPE and LLDPE), and (ii) skyrocketing urea and methanol prices, which would be supportive of earnings from the group’s F&M segment.

In a note on Thursday, the research house said PetChem is also on track to record its best-ever annual profits in FY21.

“With that, we upgrade PetChem to 'buy' (from 'hold') with a higher TP of RM10.65 (from RM8.75 previously) as we view that PetChem is on track to achieve its best-ever annual profits in FY21.

“Our valuation is based on 9.0x FY22F EV/EBITDA, which is at a slight discount to its five-year historical pre-pandemic mean EV/EBITDA of 9.5x,” it said.