Southern Cement likely to boost presence in western region: Al Rajhi Cap
Southern Province Cement Co. will likely continue to dominate the southern region and consolidate its presence in the western region, given its strong production capacity and a leading market share with close client tie-ups, Al Rajhi Capital said in a note.
"Going forward, we believe cement demand to go down significantly in the coming two quarters due to seasonality factors," the brokerage noted.
The Saudi cement producer reported a net profit of SAR 120 million (17.8 percent YoY, +132 percent QoQ) in Q1 2019, beating Al Rajhi Capital's forecasts of SAR 59 million and consensus estimates of SAR 66 million, Al Rajhi Capital added.
The profit beat was primarily driven by higher than expected selling price even though demand remained flat on a quarterly basis.
The company started to focus on higher prices rather than maintaining market share, a strategy followed by most of the Saudi cement companies during the last two quarters, Al Rajhi noted.
Post Q1 results, Al Rajhi Capital adjusted estimates for volume and prices for short term, resulting in a revised target price of SAR 41/share for Southern Province Cement with a “Neutral” recommendation.