Petronas Chemicals Group Bhd's (PetChem) weaker-than-expected earnings for the first nine months of the financial year 2024 (9MFY24) and the result that came in below expectation prompted two research houses, MIDF Amanah Investment Bank Bhd (MIDF Research) and Maybank Investment Bank Bhd (Maybank IB) to revised the company's target price (TP) downward.

With a NEUTRAL recommendation, MIDF Research has revised its TP for PetChem from RM7.54 to RM4.89, citing unrealised foreign exchange losses as the primary drag on earnings despite higher production and sales volumes.

Maybank IB, meanwhile, reduced its TP from RM4.18 to RM3.82. The research house said the revision is based on an FY25E price-earnings ratio of 17.5 times, at parity with its seven-year mean. Hence, the research house maintained its SELL recommendation for PetChem.

Both research houses are cautious about PetChem's outlook with MIDF Research projecting headwinds in its olefins and derivatives (O&D) and specialities segments that would be offset by the stability in fertilisers and methanol.

However, although PetChem's near-term recovery may be hindered by softened demand in the O&D and specialities segments, MIDF Research anticipates an eventual rebound that is supported by stronger demand for fertilisers amid forecasts of La Niña and stable methanol markets heading into 2025.

As for Maybank IB, the research house advised investors to avoid the petrochemical sector for the time being given the challenging outlook as the worst is not over for the industry for now.