Kuala lumpur: The implications will be enormously positive for Petronas Chemicals Group Bhd (PCG) if Petronas eventually seeks full integration of Pengerang Petrochemical Co Sdn Bhd (PPC), as PPC is expected to continue delivering large losses for PCG.
According to BERNAMA News Agency, in a statement on May 25, 2026, national oil company Petroliam Nasional Bhd (Petronas) said, "Full ownership of PRefChem enables Petronas to further enhance operational alignment and flexibility across its value chain." This statement has led brokerage CGS International Securities to suggest that Petronas may eventually take full control of PPC, ensuring full integration of both Pengerang Refining Company Sdn Bhd (PRC) and PPC, collectively known as PRefChem.
CGS International highlighted that without the burden of PPC, PCG could return to its previous success of producing from ethane and methane gas feedstock due to lucrative pricing arrangements, thereby eliminating exposure to the loss-making naphtha-based feedstock operations at Pengerang.
Recent announcements from Petronas and Saudi Aramco reveal that Aramco will dispose of its 50 percent equity interests in PRC and PPC to Petronas. As a result, Petronas will own a 100 percent interest in PRC, while Petronas and PCG will share a 50:50 interest in PPC.
CGS International's analysis suggests that if PCG did not hold a 50 percent interest in PPC, its core net profit forecast for the financial year ending December 31, 2026 (FY2026) would be 46 percent higher than its current estimate, with potential uplifts of 67 percent in FY2027 and 96 percent in FY2028.
The brokerage noted that the transaction will not immediately impact PCG, as it retains its existing 50 percent stake in PPC. PCG is expected to continue its close operational and shareholder cooperation with parent company Petronas at the Pengerang units.
Market expectations and the potential reopening of the Strait of Hormuz have pressured PCG's share price, with concerns about declining petrochemical selling prices and feedstock prices posing downside risks. Other risks include larger-than-expected losses at Kertih due to ongoing plant turnarounds.
Despite these challenges, CGS International views a likely sharp quarter-on-quarter recovery in PCG's earnings in the second quarter of 2026 as a key potential re-rating catalyst, reinforcing their 'Add' rating and target price of RM6.58. Additionally, should PCG dispose of its 50 percent stake in PPC to Petronas, it is anticipated that the market will respond positively and rerate the stock accordingly.