FALCOM downgrades SABIC Agri-Nutrients to “Underweight”, revises TP to SAR 85

Falcom Financial Services downgraded its rating to “Underweight” from “Neutral” on SABIC Agri-Nutrients Co., while it revised its target price (TP) upward to a fair value of SAR 85 per share.

According to World Bank, urea prices are expected to register steady growth in the near term with the continued recovery of economic activities, Falcom said in a research note.

This may lead SABIC Agri-Nutrients to register higher revenue and enhanced profitability, it added.

SABIC Agri-Nutrients maintains a strong balance sheet with an insignificant level of debt and stable free cash flow.

The brokerage firm expects the company to benefit in the long term from the acquisition of SABIC Agri-Nutrients Investment Company (SANIC), completed in January 2021.

It further estimates the recovery in urea demand to take longer than expected, as COVID-19 infections continue to spread. Also, a slowdown in the pace of vaccine rollout may impede the pace of economic activity recovery, the report.

Falcom added that the rise in natural gas prices could lead to higher costs of raw materials and increase the pressure on margins.