CIMB Research reduces Petronas Chemicals TP to RM7.90

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform on Petronas Chemicals Bhd but reduced its target price from RM9.70 to RM7.90.

In its research note issued on Monday, Aug 29, it explained it continued to rate PChem an Outperform as it could be catalysed by the recovery of utilisation and margins from 1H11’s depressed levels.

The research house said PChem’s 1QFY11 core net profit was 8% below its expectations and 22% below consensus estimates because of lower utilisation due to maintenance shutdowns.

Utilisation dropped from 84% in the quarter ending March to 70% in 1QFY11, which is the quarter ending June due to a change in fiscal year end from March to December.

“To reflect 1Q’s lower-than-expected utilisation due to shutdowns and gas shortage, we cut our FY11-FY13 earnings forecasts by 1%-14% for a revised utilisation of 76%-90% instead of 86%-95%.

“We also change our valuation basis from 10 times CY12 EV/EBITDA to a probability-weighted CY12 EV/EBITDA

valuation (70% for 10 times base case and 30% for 5.0 times recession case). This reduces our target price from RM9.70 to RM7.90,” it said.