Arabian Cement likely to post SAR 152 mln profit in 2019: Aljazira Cap
Arabian Cement Co. is expected to post SAR 152.4 million in net income for FY2019, and generate strong free cash flows (FCF) of SAR 190 million, Aljazira Cap said in a note.
Arabian Cement reported a net income of SAR 37.1 million, which surpassed Aljazira Capital's estimates and the market consensus estimates of SAR 9.2 million and SAR 7.3 million, respectively. Revenue came at SAR 189.1 million, higher than estimates of SAR 162.3 million. The profit beat was driven by an increase in its selling price by 41.8 percent.
"We revised our recommendation to “Overweight” on the stock with a TP at SAR 31.70/share," the brokerage added.
Although Arabian Cement witnessed a strong recovery in price realization per tonne in Q1-19, local volumetric sales continue to decline by 37.4 percent YoY. However, the company’s sales volumes will gradually improve over the coming years given the mega projects in the western region, Aljazira Cap added.
Downside risks are related to lower than expected contribution from Qutranah in Jordan and higher than expected cost per tonne. On the other hand, cement sector is starting to recover from its current downtrend due to producer’s concentration on selling prices and an increase in export sales, while mega projects and other housing initiatives are the key growth driver for the Saudi cement sector and could be realized beyond FY19.