Non-recurring items weighed on Maaden Q4, says Al Rajhi Cap

Saudi Arabian Mining Co. (Maaden) posted positive set of results for Q4-2016, despite coming lower than Al-Rajhi Capital’s forecasts, due to non-recurring items.

The company reported a net profit of SAR 15.7 million, falling below the brokerage firm’s expectations of SAR 84 million.

Revenue saw a 3 percent miss. Maaden posted a gross profit of SAR 498 million, below forecasts of SAR 550 million.

“In our view, given the significant scale of operations, minor quarterly misses are less meaningful as progress in WAS (Waad al Shamaal) and other company specific operating factors are on track,” Al-Rajhi Capital added.

Meanwhile, commodity prices, especially aluminum, pose downside risks for the stock in the near term.

Despite the recent rise in aluminum prices, a potential decline in the short term is likely amid a possible decrease in coal costs in China.

In the long term, Maaden is expected to continue capacity rationalization, with aluminum prices estimated at $1,750 per ton.

“As for DAP, which will become the primary contributor to group profits, we forecast ~USD400/tonne for the long term due to persisting over-supply and weak demand,” the brokerage firm added.

Al-Rajhi Capital reaffirmed its “neutral” rating on the stock, keeping its target price unchanged at SAR 40.