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Fundamental View
AS OF 22 Apr 2025Petron’s FY24 results improved slightly; we expect Petron’s credit metrics to remain flat to improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid a single-digit YoY decline in sales volume growth though partially supported by lower crude oil input costs
About two-third of its total revenues are derived from the Philippines and are indexed to Dubai crude prices, which allows for smooth cost pass-throughs and good insulation from crude price volatility.
Free cash flows are typically negative due to inventory fluctuations that outweigh low capex.
Business Description
AS OF 22 Apr 2025- Petron is the largest oil refining and retailing company in the Philippines, and the third largest player in Malaysia. It maintains a 24% market share in the Philippines (followed by Shell and Caltex) and a 20% market share in Malaysia (largest being Petronas), based on total fuel sales volumes.
- Petron has a total refining capacity of 268k barrels/day (bpd) and accounts for about 30% of the Philippines' fuel needs. Its petroleum refining facilities include the Limay Refinery in Bataan, Philippines (capacity of 180k bpd; 67% of total) and the Port Dickson Refinery in Negeri Sembilan, Malaysia (capacity of 88k bpd; remaining 33% of total).
- Petron's refineries process crude oil into a full range of petroleum products including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.
- It further markets and retails these fuel products through its fuel service stations located across the Philippines (~1,800 outlets) and Malaysia (>800 outlets).
- Petron sources its crude oil supplies from third-party suppliers, namely Saudi Aramco, Kuwait Petroleum Corporation and Exxon Mobil, which are bought on the basis of term contracts and in the spot market.
- Petron mainly supplies its petroleum and fuel products to customers in Malaysia and the Philippines (~95% of annual revenue).
- Petron is 68% owned by San Miguel Corporation (SMC), one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets. SMC's CEO, Mr. Ramon Ang, is also Petron's CEO.
Risk & Catalysts
AS OF 22 Apr 2025Petron cannot fully pass on higher crude oil input costs to customers in Malaysia.
Petron operates in low-margin business (EBITDA margins ~5%) and maintains elevated credit metrics.
Petron is highly dependent on its Limay petroleum refining complex that makes up two-thirds of its total refining capacity (67%). Any events that disrupt the refinery’s operations could adversely affect Petron’s total revenues.
Key Metric
AS OF 22 Apr 2025| PHP bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 74.3% | 72.3% | 74.0% | 75.1% | 74.5% |
| Net Debt to Book Cap | 66.3% | 63.3% | 65.5% | 68.2% | 67.1% |
| Debt/Total Equity | 289.4% | 261.6% | 284.2% | 301.4% | 292.0% |
| Debt/Total Assets | 71.3% | 71.2% | 70.2% | 67.6% | 64.9% |
| Gross Leverage | 65.4x | 11.2x | 10.9x | 7.1x | 7.4x |
| Net Leverage | 58.3x | 9.8x | 9.7x | 6.4x | 6.7x |
| Interest Coverage | 0.3x | 2.5x | 2.2x | 2.2x | 1.9x |
| EBITDA Margin | 1.3% | 5.9% | 3.4% | 5.3% | 4.7% |
CreditSight View Comment
AS OF 22 Apr 2025We maintain our Market perform recommendation on Petron. Petron’s c.Apr-2026 perp trades rightfully tighter than SMC c.Jul-2025 perp, which we see as fair given its Opco structure vs. SMC’s Holdco, its cost pass-through mechanisms, and low capex which more than offset SMC’s larger diversified businesses. Overall, we continue to take comfort in Petron’s resilient credit profile, supported by a good cost-passthrough contractual mix that provides good insulation from crude price volatility. We expect Petron to incur higher capex YoY, and expect credit metrics to remain flat-to-improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid lower crude oil input costs, as well as a further ~PHP 15 bn of preference share issuances.
Recommendation Reviewed: April 22, 2025
Recommendation Changed: January 26, 2022
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