RON95 price cut mildly positive for Petronas Dagangan
CIMB Securities said its analysis of retail volume trends over the past 10 years shows that a 10–12 per cent drop in average pump prices typically leads to only a slight increase in total retail volumes of less than one per cent.
"Furthermore, any incremental volume gains are likely to be partially offset by the exclusion of non-citizens from subsidised pricing, foreign nationals will face unsubsidised market rates of around RM2.50 per litre, based on current prices," it said.
The research house said the reduction in RON95 pump prices came as a surprise, indicating a higher-than-expected subsidy per litre despite weak global oil prices and the government's ongoing fiscal tightening efforts.
"Importantly, Petronas Dagangan operates under Malaysia's Automatic Pricing Mechanism, which ensures retail fuel margins remain protected, with the government reimbursing the difference between market and subsidised prices.
"As a result, earnings impact on Petdag is expected to be neutral, with margins safeguarded under the existing subsidy mechanism," it added.
CIMB Securities projects a 0.5 to 1.0 per cent annual decline in retail volumes from financial year 2025 to 2027, mainly due to reduced diesel sales following the full-year implementation of diesel subsidy rationalisation starting June 10, 2024.
While Petronas Dagangan posted strong results in the first quarter of 2025 driven by healthy margins in the commercial segment, CIMB Securities said this momentum may not continue, citing weaker economic activity and ongoing market softness that could pressure commercial fuel profitability.
The firm added that a key risk is the possibility of delays in government subsidy reimbursements, could strain Petronas Dagangan's working capital and cash flow.
CIMB Securities maintained its "Hold" rating on the company, with a target price of RM20.90, noting that the RON95 price adjustment seems more focused on alleviating cost-of-living pressures than significantly boosting fuel demand for retailers.
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