PETALING JAYA: Petronas Dagangan Bhd
(PetDag) is expected to deliver resilient earnings through financial year 2026 (FY26), underpinned by steady domestic demand, robust tourism and widening retail outreach despite lingering volatility in global oil markets.
The fuel retailer’s strong cash position, healthy dividend-paying capacity and attractive valuation following a recent share price decline are seen as key factors supporting a more constructive outlook among analysts.
In its report, RHB Research said: “We expect earnings to remain resilient in FY26, supported by stable domestic fuel demand, sustained tourism activities, and continued growth in PetDag’s retail ecosystem.”
It added that while geopolitical tensions could cause short-term margin fluctuations through oil price volatility, demand conditions should remain supported by Malaysia’s projected gross domestic product (GDP) growth of 4% to 5%.
RHB Research upgraded PetDag to a “buy” from “neutral”, while maintaining its discounted cash flow-derived target price (TP) of RM22.37.
It said the recent weakness in the stock had improved valuation appeal, noting that concerns surrounding commercial margin weakness, oil price volatility and longer-term electric vehicle adoption risks appeared largely reflected in current valuations.
MBSB Research also upgraded the stock to “buy”, raising its TP to RM22.46 from RM22.20 after revising its valuation assumptions.
It said PetDag’s first-quarter 2026 (1Q26) earnings were within expectations and continued to benefit from resilient household spending conditions.
“With GDP growing by 5.4% in 1Q26, household spending remained a massive cushion for PetDag, backed by a stable labour market and supportive policy measures by the government,” MBSB Research said.
It added that inflationary pressures remained manageable and that work-from-home measures for civil servants had yet to materially affect motor gasoline demand. TA Research highlighted that 1Q26 retail margins had been boosted by temporary factors.
“The management highlighted that the strong retail margin performance in 1Q26 was largely attributable to temporary inventory gains and automatic pricing mechanism timing effects following the sharp rise in Means of Platts Singapore prices during March,” it said.
The research house also noted that commercial earnings, particularly in the Jet A1 segment, had been weighed down by pricing lag effects.
However, it expects profitability in the commercial segment to recover gradually as pricing mismatches unwound, while aviation fuel demand remained supported by resilient tourist arrivals and recovering travel activity.
TA Research lowered its TP to RM20.30 from RM20.90 but upgraded the stock to a “buy” from “sell”, citing attractive upside potential after the recent share price weakness.
Kenanga Research similarly upgraded its recommendation to an “outperform” from “market perform”, while maintaining a discounted cash flow TP of RM21.20.
It said the retail division remained the main earnings driver due to stronger margins from favourable product pricing, while commercial margins were pressured by volatile fuel price movements.
“We believe that similar trends are expected to persist at least in the short term but may normalise in second half of 2026,” it said.
Kenanga Research added that the recent 16% decline in PetDag’s share price appeared excessive and already reflected concerns over the potential T20 fuel subsidy rationalisation.
It also favoured the company for its strong cash generation, growing commercial volumes and expanding convenience business driven by Cafe Mesra.
Meanwhile, CGS International Research upgraded the stock to an “add” from “reduce” following the recent sell-off, while keeping its dividend discount model-based TP unchanged at RM19.09.
It said 1Q26 core net profit was in line with expectations and highlighted prospective dividend yields of about 7%.
PetDag reported a lower net profit of RM283mil for 1Q26, compared with RM293.5mil a year earlier, as higher product costs and operating expenditures reduced the contribution from its commercial segment.
Revenue rose to RM11.15bil from RM9.09bil previously, supported by higher average selling prices and stronger sales volumes.
Meanwhile, one analyst told StarBiz that PetDag’s 1Q26 performance reinforced the defensive characteristics of the company’s business model, with resilient consumer demand and a diversified revenue base helping to cushion the impact of margin volatility across certain segments.
“While near-term earnings may continue to be influenced by fuel price movements and policy developments, the company remains well positioned to benefit from recovering travel activity, stable domestic consumption and its ability to generate strong cash flows for shareholders,” he said.
