Riyad Capital initiated its coverage of Saudi Electricity Company (SEC) with a ‘neutral’ recommendation and a target price of SAR 18 per share.
The brokerage firm said in a research note that the electricity company posted weaker financial results during the first 9 months of 2019.
The brokerage firm also said SEC’s profitability will remain under pressure in FY2019 and FY2020, due to lower sales and higher cost of revenues and finance charges.
It also expects the company’s revenue to decline in 2019 and 2020, ahead of recovery over the next few years given the growing subscribers and new projects that are set to be launched in the Kingdom.
Finance charges which took an uptrend over the last three years are set to maintain the same trend in 2019.
“With the increasing population, expanding residential sector, and growing consumption from the governmental and industrial sectors, we find that SEC will need to continue raising its capital expenditure to grow its capacity to meet future demand and improve reliability. This will lead the company to seek even more loans in the future,” the brokerage firm concluded.
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