The research house, which has an underperform rating on the stock, slashed its target price to RM17.95 from RM20.06 previously.
"Although its share price has fallen 6% in the past one month, its valuation remains expensive at 25x FY21 PER albeit with a decent yield of 3%.
"Furthermore, its earnings are more vulnerable in this depressed market condition as the restriction on travelling will take a toll on its earnings," it said.
For 1QFY20, Petronas Dagangan disappointed with a headline net loss of RM29.4mil as earnings were hit by Mean of Platts Singapore (MOPS) losses leading to a RM36.3mil write-down of inventory to net realisable value in the commercial segment.
Excluding the exceptional items, 1QFY20 core profit was RM11.5mil, which came to 2.2% and 1.6% of Kenanga's and consensus full-year estimates.
The retail segment recorded a pre-tax loss of RM84.1mil from a pre-tax profit of RM68.3mil in the previous quarter due to huge MOPS losses.
Earnings were also impacted by overall lower volume owing to the movement control order and falling average selling prices, which led to contracting revenue.
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