Analysts foresee buoyant prospects for PetDag’s commercial segment.
PETALING JAYA: Petronas Dagangan Bhd
(PetDag) is poised for a resilient performance despite subsidy cuts, supported by its strong market share in diesel sales and fleet-card users.
Analysts foresee buoyant prospects for PetDag’s commercial segment, driven by stable jet fuel prices and year-end travel demand, while retail sales may face slight pressure, as the upcoming RON95 subsidy rationalisation could bring longer-term implications.
Hong Leong Investment Bank Research (HLIB Research) said in a report that the impact on PetDag’s diesel sales after subsidy cuts might have been overestimated as the group holds a relatively high market share among its competitors in the commercial diesel market and fleet cards for the retail segment.
“In our view, these factors might have helped PetDag to sustain its overall diesel sales after the subsidy cuts this year,” the the research house said.
“The commercial segment is expected to stay buoyant in the coming quarter, as jet fuel prices have maintained a downward trend at US$89 per barrel in the fourth quarter of this year (4Q24) versus US$92 in 3Q24,” the research house said.
HLIB Research said jet fuel volumes are generally more robust at year-end due to the holiday travel season.
“However, we expect some contraction in the retail segment in 4Q24 as a result of tapering petrol MOPS costs,” the research house said.
HLIB Research upgraded PetDag to a “buy” with a higher target price of RM22.49, up from RM19.13.
PetDag’s net profit jumped 81.4% to RM335.1mil in 3Q24 from RM184.7mil in 3Q23. The results were slightly ahead of expectations.
TA Research said in line with the stronger-than-expected result, it raised its earnings forecasts for PetDag by 22.6% for 2024 and 8.5% for 2025 and 2026 to reflect higher margins, specifically for this year, as well as higher sales volumes.
Following the earnings revisions, the research house raised its target price for PetDag to RM18.20 from RM18.10 and upgraded its ratings on the counter to “hold” from “sell”.
“Following the subsidy removal for diesel this year, the government is expected to implement subsidy rationalisation for RON95 petrol from the middle of 2025.
“While we were earlier concerned about the RON95 subsidy rationalisation, we believe the impact to sales volume in the immediate term could be mild as we believe the T15 income group is unlikely to significantly reduce consumption because of the measure,” TA Research said.
“We note, however, there is always the possibility of expanding the scope of RON95 subsidy rationalisation to other income groups beyond the T15 further out, especially in the broader context of driving the transition to cleaner transportation modes,” the research house added.
Meanwhile, Kenanga Research maintained its “outperform” call on PetDag, with an unchanged target price of RM21.20. Similarly, MIDF Research reiterated a “buy” call on the counter, with an unchanged target price of RM24.63.
Kenanga Research said that the targeted implementation the petrol subsidy rationalisation is unlikely to significantly disrupt consumer behaviour significantly, ensuring minimal impact on PetDag’s volumes.
“This, coupled with the company’s strong fundamentals, positions it well for a steady performance in the near term,” it said.
