Saudi Basic Industries Corp.’s (SABIC) second-quarter earnings of SAR 6.7 billion beat Al Rajhi Capital and consensus estimates of SAR 5.03 billion and SAR 5.5 billion, respectively, the financial advisory firm said in an earnings review.
SABIC’s top-line was 2.2 percent above Al Rajhi Capital’s estimate, driven by improvement in costs.
Selling, general and administrative costs were below Al Rajhi Capital’s estimate by nearly SAR 0.3 billion, it added.
“While top-line came 2.2 percent above our estimate, the improvement in costs notwithstanding the increase in naphtha prices and shutdown at Netherland plant, led to the beat in gross profit (even after adjusting for the strategic restructuring one-off expenses, SAR1.1 billion in last quarter),” the report said.
The strong set of results come at a time when Saudi Aramco is looking to take a stake in SABIC and the company is expected to be included in emerging market indices.
Al Rajhi has assigned a target price of SAR 135 per share to SABIC.
“Key upside triggers are associated with acquisitions, faster than expected successful commercial launch of its future expansion projects and increase in product spreads,” the report said.
“Downside risks include weak oil and thereby decline in petchem product prices, unplanned plant shutdowns and any further unexpected revision in the subsidized feedstock prices.”
SABIC’s newer projects, such as the oil-to-chemical project, are quite large and unconventional, which could be a negative risk factor, it added.
Comments
{{DisplayName}}
{{ElapsedTime}}