By Ying Xian Wong


Shares of Petronas Chemicals Group Bhd. are down after several analysts cut ratings, citing expected lower margins and an uncertain outlook for 2023 after the company's latest quarterly earnings.

Petronas Chemicals' shares fell as much as 4.6% to 8.66 ringgit (US$1.93) in Tuesday morning trade, on track for the biggest one-day decline since July.

The company on Friday said third-quarter net profit fell 3.5% on year, with the bottom line hit by higher taxes and a loss from joint ventures that marked a reversal from a significant gain a year earlier. Petronas Chemicals also said it expects product prices for olefins and derivatives to be "moderate on weak demand due to lower downstream margin[s] and high inflation."

Hong Leong Investment Bank analyst Jeremie Yap downgraded the company to hold from buy and cut his target price to MYR9.20 from MYR11.76. He said profits could peak this year and decline in 2023 given the "imminent normalization in product spreads".

The petrochemical upcycle has now likely passed, with product spreads beginning to decline from peaks, Mr. Yap said in a note.

"We advise investors to lock in profits and embrace the likely outcome of a petrochemical bear cycle in 2023," he wrote.

Maybank Investment Bank analyst Anand Pathmakanthan said weakening average selling prices of products is likely to compress margins. He expects prices to moderate in the coming months "as demand from slowing economies wane and China resumes exports following protracted controls earlier this year," he said in a research note.

Maybank downgrades Petronas Chemicals to hold from buy, citing a "challenging macro environment on the horizon", trimming its target price to MYR9.10 from MYR11.20.


Write to Ying Xian Wong at yingxian.wong@wsj.com


(END) Dow Jones Newswires

11-28-22 2151ET