Petronas Chemicals Group Bhd (PetChem), whose shares soared as the war in the Middle East raged, has been downgraded by some research houses after easing tensions in the region took the wind out of its sails.
Last week, the US and Iran inked a memorandum of understanding (MoU) as an initial step towards bringing the war to a close.
Since then, PetChem’s shares have been on a downward trajectory. It has fallen about 34% over the past fortnight as efforts to end the conflict gathered steam.
At the time of writing, the stock was down 6.6% or 27 sen to RM3.83, valuing the group at RM30.64 billion. However, the shares are still up 29% from just before the war began on Feb 28.
Its shares have surged as much as 107% to RM6.13 after the conflict ignited and Tehran effectively closed the Strait of Hormuz, driving up petroleum and petrochemical prices.
PetChem was seen as a prime beneficiary of the crisis as it gets its feedstock supplies from within Malaysia rather than the Middle East.
In a note today, TA Research said the reopening of the Strait of Hormuz represents a de-rating catalyst for PetChem, as it removes one of the key factors supporting the recent rally in petrochemical prices.
“As logistical bottlenecks ease and Middle East exports recover, petrochemical prices and spreads should gradually revert towards pre-conflict levels, removing a key earnings tailwind for PetChem,” it said.
The research house downgraded the stock to “sell” from “buy” and lowered its target price (TP) to RM4.32 per share from RM6.56 previously.
“We believe the recent correction signals the unwinding of geopolitical risk premiums across commodity markets. As such, we do not expect the extraordinary gains recorded during April-May to be sustained,” said TA.
Maybank Investment Bank has also downgraded PetChem to “sell” from “hold”, slashing its TP by 30% to RM3.92 per share from RM5.62 previously.
It said the recent event-driven “petrochemical super cycle” was fading, raising the risk of a de-rating as PetChem’s earnings growth tapers off.
“Product prices are expected to normalise in the coming quarters due to weaker demand and easing supply-chain disruptions, while China continues to add petrochemical production capacity, albeit at a slower pace following the Middle East tensions,” it said in a note on Tuesday.
Maybank also cut its core net profit forecast for FY2026 by 31% to RM2.07 billion from RM3 billion, citing lower plant utilisation, weaker margins and declining urea prices.
There are currently eight “buy”, 10 “hold” and three “sell” calls among the research houses tracked by Bloomberg, with the average target price at RM5.64.
PetChem is the chemical arm of national oil company Petroliam Nasional Bhd (Petronas) and is one of Southeast Asia’s largest integrated chemical producers. It operates 21 manufacturing sites and 54 production plants.
