PETALING JAYA: Maybank Investment Bank Research (Maybank IB) has maintained a “negative” outlook on Malaysia’s petrochemicals sector for 2026, warning of a drawn-out structural downtrend in olefin and polymer prices.
The downtrend is forecast to ensue massive global capacity additions, projected at a cumulative 49 million tonnes per annum (tpa) from 2025 to 2028.
Maybank IB has further issued “sell” ratings for two of Malaysia’s major players, Petronas Chemicals Group Bhd
(PetChem) and Lotte Chemical Titan Holding Bhd respectively.
This is due to the delay in demand-supply recovery, expected only post-2027.
“We believe that the capacity closures announced so far are unlikely to be sufficient, to offset the oversupply environment.”
Within the local market, PetChem has recorded subdued profit after tax for the past five quarters, and the group is expected to trend deeper in negative territory, as polymer prices continue to downtrend.
Notwithstanding PetChem’s key advantage of lower fixed-price gas feedstock from parent Petroliam Nasional Bhd or PETRONAS, volatility from its naphtha-based Pengerang unit and weak polymer spreads will continue to drag group earnings, keeping olefins and derivatives (O&D) margins in negative territory.
At a price-to-earnings multiple of 45 times, analysts deemed the valuation “demanding”, given the prolonged weakness in O&D spreads and prices.
In similar tune, Lotte Chemical Titan’s core net losses are expected to deepen in 2026 due to the commissioning of its LINE project in Indonesia.
“While this marks a key milestone for the company, it could weigh on earnings as the group begins recognising an annual depreciation of approximately RM700mil (based on our estimates), in our view,” said Maybank IB.
Given current market conditions and softening olefin prices, the company faces an immediate challenge to achieve breakeven.
The investment bank also raised concerns over the group’s deteriorating balance sheet, which began in the financial year ended December 2022.
