Aljazira Capital expects Saudi Kayan to post a net loss of SAR 508 million in fiscal year (FY) 2019, while returning to profitability.
The brokerage firm said in a research note that Saudi Kayan’s Q3 2019 net profit of SAR 1.25 million was significantly above market consensus estimates of SAR 142.3 million.
“The result was mainly driven by a decline in feedstock cost and finance expenses. However, the company’s gross margin improvement is not likely to continue in Q4 2019 due to expected higher feedstock prices,” the note said.
“The company’s strong gross margin is not likely to continue in Q4 2019 due to expected higher feedstock prices and lower product spreads,” it further added.
Aljazira reiterated its “Overweight” recommendation on KAYAN with a target price of SAR 14.50 per share.
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