Advanced’s Q3 net profit in line with estimate, says NCB Cap

Advanced Petrochemical Co.’s third-quarter net income of SAR 208 million matched NCB Capital’s estimates of SAR 213 million but topped consensus forecasts by 8.6 percent. 

Revenue also came in line with forecasts at SAR 616 million, NCB Capital said in an earnings review on Tuesday.

Advanced’s share in the net income of its affiliate SK Advanced Facility increased to SAR 24 million in the same period, from SAR 14.3 million in Q3 2016 and SAR 10.5 million in Q2 2017, exceeding NCB Capital’s expectations of SAR 13 million.

Gross margins stood at 36 percent in Q3, missing the brokerage firm’s estimate of 39 percent.

“We believe this is due to higher than expected operating costs. However, the lower than expected gross profit was offset by a strong contribution from 30 percent owned JV, SK Advanced which grew 68.2 percent YoY,” NCB Capital added.

Operating expenses came in at SAR 27 million in the third, matching the brokerage firm’s estimate of SAR 29 million.

Key strengths are the company’s higher operating rates and efficiency, strong balance sheet and an attractive dividend yield of 6.2 percent. However, normalizing polypropylene-propane spread remains a key risk.

The brokerage maintained a “neutral” rating on the stock with a target price of SAR 42.8.