Petronas Dagangan Berhad Receives "Maintain Buy" Rating from MIDF Research With Target Price of RM24.63

PDB's financial performance has been resilient, with the company reporting a revenue of RM37.549 billion in 2023, projected to grow to RM49.291 billion by 2027. The operating profit is expected to increase from RM1.524 billion in 2024 to RM1.838 billion in 2026. This growth is underpinned by a strong core EPS, which is anticipated to rise from 107 sen in 2024 to 131.6 sen in 2026. The expected total return on investment stands at an impressive +39.6%, reflecting the company's potential for robust financial growth.

Sustainable aviation fuel (SAF) is a cornerstone of PDB's sustainability efforts. Despite challenges in pricing and regulations, PDB is expected to commercialize SAF by 2028. The company has established strategic partnerships with Malaysia Aviation Group and Neste to fortify the SAF supply chain and is improving refining, storage, and distribution facilities for SAF. PDB's SAF initiative is in line with its Used Cooking Oil (UCO) collection program, which converts UCO into biofuel, including SAF.

PDB is leveraging the growing demand for coffee and on-the-go meals by expanding its Café Mesra franchise beyond pump stations. This move is expected to positively impact its convenience business in the long term, especially as coffee consumption in Malaysia has grown over 75% since 2020. The profitability of Café Mesra's products is being closely monitored, and this expansion is seen as a strategic move to capture the shifting consumer spending patterns.

MIDF Research maintains a 'Buy' rating on PDB with an unchanged target price of RM24.63. This rating is supported by PDB's strong financial performance, commitment to sustainability, and the potential for growth in its non-fuel business. The expected share price return is a substantial +34.4%, with a dividend yield of +5.2%, indicating a healthy investment prospect.

PDB continues to observe the impact of targeted fuel subsidies on its retail and commercial diesel segments. The company has reported a decrease in retail diesel volume following the subsidy rationalization, with the commercial segment compensating for this decrease. PDB is also delivering better electric vehicle (EV) solutions in partnership with Gentari, establishing 67 EV charging stations across the nation. This integration of EV charging stations aligns with PDB's ESG goals and signals a potential increase in demand for green solutions.

MIDF Research's positive stance on PDB is reaffirmed by the company's ongoing SAF project, expansion of Café Mesra, and integration of EV charging stations. These initiatives, coupled with the anticipation of higher travel frequency during the end-year holiday season, position PDB for better sales volumes. The green mobility initiatives and clean fuel projects make PDB an attractive investment, with fuel prices expected to remain stable, barring any geopolitical escalations.