National Industrialization Co. (Tasnee) reported a second quarter net profit of SAR 395.8 million, which were in-line with Al Rajhi Capital’s expectations and above consensus forecast of SAR 347 million, the financial advisory firm said in an earnings review.
The latest financial results reaffirm Al Rajhi Capital’s view on the company, the report said.
“As per our estimates, performance of the industrial segment was firm in Q2, driven by uptick in TiO2 prices and operating rate for the petchem segment improved after remaining under pressure in Q1,” it said.
The Q2 revenue rose about 6 percent quarter-on-quarter to reach SAR 2.99 billion, in-line with Al Rajhi’s estimate of SAR 2.95 billion and consensus view of SAR 2.9 billion.
Gross margin remained stable at 29.1 percent sequentially amid steady production efficiencies, while operating profit outpaced the top-line and gross profit growth, supported by improved equity income, the report said.
The stock has achieved Al Rajhi Capital’s earlier target price of SAR 23 per share, and given steady product prices and no major near term risk factors, the stock price momentum is likely to carry forward.
The brokerage raised the target price on the stock to SAR 26 per share.
A delay in the Cristal deal could be positive as the business continues to generate solid free cash flows and can help the company to lower its huge debt, the report said.
Key downside risk factors are decline in TiO2 prices, impairments, increase in SAIBOR and shutdowns at petrochemical plants, it added.
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