CIMB Securities has cut its FY24, FY25 and FY26 core net profit forecast for PetDag.
PETALING JAYA: Petronas Dagangan Bhd
(PetDag) is expected to witness slower sales volume growth following the upcoming implementation of targeted subsidies by the government, says CIMB Securities.
It expected PetDag’s retail sales volume growth to be lower by 1.5% year-on-year (y-o-y) in financial year 2024 (FY24) and fall a further 0.5% y-o-y in FY25 and FY26.
The fall would be primarily due to a drop in RON95 sales to the T20 class group. Sale of the petrol to the said class are forecast to drop by 0.1% in FY24 and 2.6% in FY25 and FY26.
That said, diesel sales volume is expected to grow at 3.2% y-o-y in 2024 and a bit slower by 1.3% y-o-y in FY25 and FY26.
CIMB Securities forecast the current RON95 price cap of RM2.05 per litre for the B40 and M40 class groups will remain unchanged, while the T20 category is projected to see a 15 sen hike in the price of RON95 and diesel prices every six months.
The price increase will continue until reaching market value – an adjustment process that may take more than four years to complete.
“Overall, we project FY24 average selling prices (ASPs) for the retail segment to increase by 1.1% and to rise further by 4.5% and 4.1% in FY25 and FY26, respectively.
“Based on the current oil price, we estimate the market price for RON95 and diesel is RM3.40 and RM3.75 per litre,” the research house noted in a report.
CIMB Securities estimated a robust rebound in jet fuel sales, driven by an increase in airline fleet size, seat capacity and routes, will counterbalance the predicted slower retail sales growth.
As the number of airlines in operation rise and air travel improved further, the research house expected jet fuel sales volume would increase by 8.7% y-o-y in FY25 and 6% y-o-y in FY26 as growth returns to normal.
“We estimate PetDag’s overall sales volume of the commercial segment to grow by 10.9% in FY24, 6.3% in FY25 and 4.9% in FY26,” it said.
CIMB Securities noted that the implementation of targeted subsidies will allow PetDag to benefit from full payments directly from the end consumers, which would result in improved cash flow generation.
That should allow PetDag’s FY24 dividend payout rate revert to 100%, the research firm said.
“We forecast FY24, FY26 and FY26 dividend per share of 97 sen, based on 100% payout, above its policy of 50%. We believe our assumption on dividends, implying dividend yield of 4.4%, is supportive of share price,” it added.
Given the probable excess cash balance that result from the targeted subsidy implementation, a special dividend appears to also be possible.
However, CIMB Securities has cut its FY24, FY25 and FY26 core net profit forecast for PetDag by 3%, 9.9% and 14.6%, respectively.
It also maintained a “hold” call on PetDag with a reduced target price to RM20.30 per share based on a price-to-earnings ratio of 21 times.
The research house believed the valuation is fair, given the uncertainty over the potential negative impact to its sales volume upon the implementation of the targeted subsidies.
