Challenging outlook for olefins in 2H, despite firm fertilizer outlook

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Challenging outlook for olefins in 2H, despite firm fertilizer outlook

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Petronas Chemicals

Challenging outlook for olefins in 2H,

despite firm fertilizer outlook

Reiterate Rating: UNDERPERFORM | PO: 3.70 MYR | Price: 4.02 MYR

Reiterate U/P; expect slower O&D in 2H26 30 June 2026

We reiterate Underperform on Petronas Chemicals (PCHEM), as its exposure to commodity Equity

chemicals is likely to face cyclical pressure on core product prices and margins (notably

ethylene and its derivatives) over the next 12 months, driven by persistent supply-side

Key Changesrisks. We expect crude oil to stabilize at US$70-US$80/bbl for most of 2H26 (vs.

US$94/bbl in 1H26) and remain at US$70/bbl level in 2027E (see report ‘Oil gets the (RM) Previous Current

memo’), which is a key determinant for PCHEM’s earnings (gas-based cracker). Price Obj. 4.00 3.70

O&D price declines; long-term fundamentals challenging 2026E2027E EPSEPS 0.130.14 0.240.15

In Jun’26, average selling prices for O&D products fell by 16% from the peak level in 2028E EPS NA 0.15

Apr’26, tracking softening crude oil prices (Brent fell by 27% during the same period). 2026E EBITDA (m) 4,299.1 5,258.3

We expect the challenging macro backdrop at petrochem to continue through 2027-28. 2027E EBITDA (m) 4,668.4 4,629.4

For ethylene, we forecast incremental global capacity addition of 41mn tonnes over 2028E EBITDA (m) NA 4,587.4

2025E-28E, with incremental demand growth of 22mn MT in the same period. We

estimate the core products’ prices (ethylene and its derivatives) to be moderated in 2H.

Sun Jung Lee >>

F&M: better positioned; firm outlook on tight supply ResearchMerrill LynchAnalyst(Seoul)

In our view, PCHEM’s F&M business could be a swing factor for earnings, as it’s better +82sunjung.lee@bofa.com2 3707 0538