Sahara reported a net income of SAR 88.6 million for Q2 2017, broadly in-line with NCB Capital estimates and 12.2 percent higher than the consensus estimate of SAR 79 million, the brokerage said in a note.
“We believe higher than expected income from SEPC (Saudi Ethylene and Polyethylene Co.) mitigated the losses of the acrylic facility,” the brokerage noted, adding that the acrylics facility’s weak performance was due to lower prices in Q2.
Sahara’s income from associates stood at SAR 106 million in Q2 2017, higher than NCB Capital’s estimate of SAR 101 million and broadly in-line with SAR 103 million in Q1 2017.
According to the brokerage’s calculations, Al-Waha contributed SAR 37.7 million to Sahara net income in Q2 and recorded gross margin at 24.7 percent in Q2, in-line with estimates but lower than 32.7 percent in Q2 2016.
The weak gross margins were attributed to the impact of the shutdown, and lower polypropylene-propane spread, which fell nearly 14 percent year-on-year (YoY) and 6.2 percent quarter-on-quarter (QoQ).
NCB Capital recommended a “Neutral” on Sahara with a target price of SAR 13.5.
Improvement in Al-Waha’s operating rates following the shutdown is a positive, the report said.
“However, normalizing PP-propane spread, ongoing losses at SAMAPCO and acrylic facility, lack of operational visibility after the deconsolidation of Al-Waha are the key risks,” the brokerage added.
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