KUALA LUMPUR: CIMB Equities Research said Petronas Chemical Group’s weaker core earnings in the quarter ended Sept 30, 2013 (Q3, 2013) reflected the lower operating efficiency of its product portfolio.
It said on Friday this based on the comparison with its closest peer Thailand’s gas-based PTTGC, which posted solid Q3, 2013 earnings despite the shutdowns and lower gas feedstock.
“We expect PChem’s 4Q13 earnings to rebound but FY14 earnings growth to be limited due to the weaker margin outlook,” it said.
CIMB Research said PetChem’s 9M13 core net profit was broadly in line with its estimate at 71% of its full-year forecast, as it expects stronger Q4, 2013 earnings post-shutdown.
“We maintain our Neutral call and FY13-15 EPS forecasts but raise our target price to RM7.7, based on 8.0 times CY15 EV/EBITDA (the regional peer average) as we roll over to FY14,” it said.
As for Q4, 2013, it expects earnings to rebound on the back of higher olefin volumes post-shutdown and higher olefin margins from the rising industry demand. Fertiliser revenue should recover quarter-on-quarter in Q4, 2013 due to the stronger seasonal demand for urea.
“We prefer Thailand’s gas-based PTTGC for its strong volume growth in Q4, 2013-FY14, following the multiple shutdowns and gas feedstock shortage from the GSP#5 shutdown.
“PTTGC’s 9.5 times FY14 P/E is still cheaper than PetChem’s 14x, which we do not think is justified as its estimated FY14 earnings growth of 12% is higher than PChem’s 6%,” said CIMB Research.