Petronas Chemicals hit by downtime, rating slashed
The firm downgraded its call on the stock to 'Hold' from 'Buy' with a lower target price of RM3.53 from RM4.41 previously.
"This adjustment reflects heightened earnings risks stemming from recurring operational issues, including unplanned shutdowns, unexpected disruptions and prolonged downtime, alongside a deteriorating sector outlook," it said in a note.
Additionally, CIMB Securities revised downwards its earrings forecast for the company by 23.7 per cent, 25.9 per cent and 13.1 per cent for financial year 2025 (FY25), FY26 and FY27.
The cuts reflect the impact of lost production from its high-margin cracker which was offline for nearly a month, lower utilisation at ex-Pengerang Petrochemicals Complex (PPC) due to prolonged downtime since early February and rising risks from recent US tariff measures, which further cloud demand visibility and intensify margin pressure.
The firm noted that Petronas Chemicals' Kertih operations are undergoing another unplanned downtime, with the first cracker offline due to a vessel wall wear-and-tear issue at one of the plant's units.
"This marks the second downtime this year affecting Kertih operations, following a 20-day downtime in January due to utility disruptions from Petronas Gas," it said, adding that the issue is being addressed and operations will resume by end-May.
Due to this issue, CIMB Securities expect weaker earnings for the olefins and derivatives segment in the second quarter of 2025 (Q2 2025).
"Although overall plant utilisation may still be around 90 per cent, we expect that the costs of rectifying the issue and reliance on strategic sourcing will likely pressure profit margins
and weigh on Q2 2025 earnings," it added.
Meanwhile, Pengerang Refining and Petrochemical has extended the shutdown of its cracker to the second half of May 2025.
It noted that PPC is currently operating at very minimal capacity owing to an ethylene and propylene feedstock supply disruption caused by an unplanned shutdown at Pengerang Refining Company.
"Given the limited operations, we project a much lower plant utilisation rate for PPC in FY25F — we now estimate it could hover around 40 per cent, down from our earlier projection of 50 per cent," it said.
PPC's earnings are also expected to remain in the red, potentially matching the projected loss for Q1 2025 of between RM100 million and RM150 million.
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