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Sustainability continues to be pivotal for PCG

Petronas Chemical Group has made significant progress in instilling sustainability in its core, in accordance with the Economic, Environmental, and Social (EES) pillars.

In FY21, the group reportedly succeeded in establishing the Clean Zero Carbon Emission Plan (NZCE) 2050, which is suitable for the chemical industry in guiding with climate impacts, business resilience, and opportunities from climate change and economic circulars in mind.

Under the plan, PCG has set a new carbon reduction target of 20% by 2030 and another 60% by 2040 and net-zero by 2050.

PCG also has continued to invest in the well-being of its employees and the community, including Covid-19 Relief Package distributions, flood relief initiatives, public education on waste management, mangrove conservation, and bio-diversity programmes.

Revised FY21-FY22 earnings estimate

“Given the positive annual report by PCG and its future prospects going in tandem with the current commodity price trends, we revise our yearly earnings forecast for FY22 and FY23 by +3% and +4% respectively,” says MIDF.

“In line with the revised earnings estimates, we also revised our target price (TP) from RM10.68 to RM11.10 for PCG, based on pegging PER of 11.5x on a revised EPS22 of 96sen.”

Maintains buy call on PCG

MIDF says it maintains its BUY call on PCG with a revised TP of RM11.10. “All in, maintain our BUY call on PCG with the revised TP of RM11.10 per share.

“Regardless of the uncertainties of Covid-19-related global economic recovery, supply chain disruptions and price inflation, PCG maintained its focus on plant operations and safety, recording best-in-class plant utilisation rates of 93%, total production of 10.4 mT per annum, and an excellent safety record.”

As a result, PCG ended FY21 with record earnings of RM7.3 billion, and had declared its highest dividend payout of 66 sen.

Despite sharing the same view with PCG that an end to the war could stabilise the feedstock prices by the end of CY22, we believe the uncertainty on how and when the war would end remains.

Even with the conflict resolved, the issue of inflation and tight global supply of hydrocarbon, as well as the ongoing Covid-19 pandemic, could still be risks that could maintain the volatility of feedstock prices.

“Nevertheless, we reiterate our positive stance with PCG and its competitive benefit, based on its: (i) resilient balance sheet and broad portfolio, (ii) strong local and regional footprint, (iii) diverse product range, (iv) exceptional relationships with partners, clients, suppliers and workers, and (v) continuous focus on sustainability and safety in its operations and initiatives,” adds MIDF.