Riyad Cap maintains Sahara at ‘buy’, trims target price

Riyad capital has maintained a “buy” rating on Sahara Petrochemical Co. as the stock price has seen “a correction and current valuations are attractive.”

However, it has revised the stock’s target price to SAR 15 per share from SAR 16 with an expected dividend yield of 5.8 percent for 2017.

The petrochemical producer’s net profit of SAR 96 million in the first quarter of this year exceeded the brokerage’s estimates of SAR 71 million. On a sequential quarter basis, Sahara’s Q1 earnings dropped 41 percent, but were higher than the SAR 55 million reported in Q1-2016.

Some of the highlights of its Q1 results are the changes in financial reporting by de-consolidating its 75 percent owned Al-Waha project from Q1-2017. Sahara will start recording its share of profit from associate in the JV co-owned by Lyndon Basell.

“Overall, the change in financial reporting has brought-in changes in the income statement with non-recurrence of revenue and operating profit figures, while changes in balance sheet is a mere restatement of deconsolidation, i.e. lower debt, downsizing fixed assets in the books by increasing the value of investments in associates,” the report said.

Over Q1, share of associate income stood at SAR 103 million, with a 72 percent year-on-year (YoY) rise, mainly driven by TSOC and Al-Waha though SAAC and SAMAPCO narrowed its losses.