PETALING JAYA: TA Research expects Petronas Chemicals Group Bhd
(PetChem) to remain supported by temporary supply tightness this year, but believes the company’s earnings momentum will weaken from 2027 as geopolitical disruptions ease and structural oversupply resurfaces in the global petrochemical market.
The research house has downgraded the stock to a “sell” from “buy”, while cutting its target price to RM4.32 from RM6.56 previously.
This is after lowering its valuation multiple to reflect a more challenging industry outlook. It said the reopening of the Strait of Hormuz removes one of the key catalysts that had driven the recent rally in petrochemical prices.
“We believe the reopening of the Strait of Hormuz represents a de-rating catalyst for PetChem, as it removes one of the key factors supporting the recent rally in petrochemical prices,” the report said.
According to TA Research, supply disruptions during the United States-Iran conflict had lifted prices as concerns mounted over exports from the Middle East, a major supplier of methanol, polyethylene, polypropylene and other petrochemical products to Asia.
However, with shipping activity gradually normalising following the ceasefire, the research house expects petrochemical prices and product spreads to ease towards pre-conflict levels over the coming months.
It cautioned that the recent surge in prices was driven largely by an exceptional supply shock rather than any meaningful improvement in industry fundamentals.
