KUALA LUMPUR: CIMB Securities Sdn Bhd has maintained its "Hold" recommendation on Petronas Dagangan Bhd (Petdag) with an unchanged target price of RM22.30, noting that while the company has guided for a more positive outlook in the second half of 2025, earnings risks remain.
The firm kept its earnings forecast for financial year 2025 to 2027 (FY25–27), as it expects only limited upside to sales volumes amid a subdued macroeconomic backdrop.
"We also anticipate earnings volatility in the commercial segment, driven by potential pricing pressures amid softening demand conditions," it said in a note.
CIMB said PetDag currently trades at an FY26F price-to-earnings (P/E) ratio of 20.9 times, broadly in line with its 10-year historical average of 20 times, which it views as fair.
The firm said the key downside risks to the company include a sharper reduction in retail sales volumes following subsidy rationalisation and faster electric vehicle adoption.
It noted that the retail segment sales volume for the first half of 2025 slipped 10 per cent due to a shift in diesel demand from the retail to commercial segment following the implementation of diesel subsidy rationalisation on June 10, 2024.
PetDag also observed softer motor gasoline consumption, driven by the normalisation of domestic travel and more cautious consumer spending.
"Nonetheless, the company anticipates retail sales volume recovery in the second half, supported by stronger domestic consumption, seasonal travel trends and a continued rebound in tourism activity.
"The expected uplift is underpinned by minimum wage hikes and salary adjustments for civil servants, reduction in RON95 pump price to RM1.99 a litre effective September 2025 and increased mobility during festive and year-end holiday periods.
"It will also be driven by targeted cash assistance programmes, including the Sumbangan Asas Rahmah (Sara) scheme, which will provide a one-off RM100 cash aid to Malaysian citizens, likely helping to alleviate spending constraints," CIMB said.
CIMB added that commercial segment sales volumes are also expected to remain resilient in the second half, supported by steady demand for Jet A1 and diesel as tourism activity is now approaching pre-Covid-19 levels.
This, combined with new airline contracts secured as more carriers enter the Malaysian market, is expected to sustain aviation fuel consumption.
The firm also said that PetDag expects ongoing infrastructure developments in Sabah, Sarawak, and Johor—including the Pan Borneo Highway and new data centre projects—to drive consistent diesel demand.
PetDag also highlighted improved customer retention following the implementation of the diesel subsidy rationalisation (SKDS 2.0), which has led to a structural shift in diesel volumes from the retail segment to the commercial segment, with minimal impact on overall demand.
"Nonetheless, while volume prospects remain strong, we caution that commercial segment margins are susceptible to volatility due to fluctuations in Mean of Platts Singapore (MOPS) and Brent crude oil prices, as well as cyclical variations in commercial fuel demand," the firm added.