By Ying Xian Wong


Petronas Chemicals Group shares fell early Wednesday, after analysts expressed concern about the company's outlook after its second-quarter net profit plunged.

Shares of the Malaysian petrochemical slid as much as 3.3% and were recently 3.0% lower at 6.80 ringgit, bringing year-to-date losses to 22%.

Petronas Chemicals said Tuesday afternoon that second-quarter net profit was MYR628 million ($135.1 million), compared with MYR1.87 billion a year earlier, mainly weighed by lower product spreads as well as a smaller share of profit from joint ventures and associates. Quarterly revenue rose 8% on year to MYR7.11 billion, driven by higher sales volumes and inclusion of the revenue contribution from a recently acquired subsidiary.

MIDF Research cut Petronas Chemicals' target price to MYR6.72 from MYR7.04 and kept its rating at neutral, citing a challenging outlook.

Consumer spending and competition from other producers could continue to affect global petrochemical demand, and potential oversupply could result in downward price pressure, affecting profits and reducing plant usage, MIDF said in a note.

MIDF cut Petronas Chemicals' 2023 and 2024 earnings forecasts by 28% and 37%, respectively, after the company's first-half earnings came in below its expectations.

Citi maintained a sell rating on Petronas Chemicals, as it sees limited earnings visibility on its specialties segment and subsidiary Perstorp, and it cut the company's 2023-2024 EPS estimates by 6% and 9%, respectively, with an unchanged target price at MYR6.00.

Petronas Chemicals share price has risen lately, along with the bottoming of the global urea price, but further upside seems limited due to China's robust urea production, Citi analysts Oscar Yee and Desmond Law said in a note.

Citi analysts expect a modest on-quarter recovery for Petronas Chemicals' third quarter earnings before interest, taxes, depreciation, and amortization amid anticipated better prices for olefins and derivatives, but commercial startup of its Pengerang project toward late-2023 could weigh on earnings, due to its expected weaker margin.

Kenanga Investment Bank is cautious on Petronas Chemicals outlook, as it expects the petrochemical market to remain weak amid a long-term supply glut.

Kenanga kept Petronas Chemicals' rating at underperform with an unchanged target price of MYR6.20.


Write to Ying Xian Wong at yingxian.wong@wsj.com


(END) Dow Jones Newswires

08-23-23 0032ET