Falcom expects SAFCO’s operating rates to improve; raises TP to SAR 77

Saudi Arabia Fertilizer Co.’s (SAFCO) operating rates are expected to improve as the company implemented the reliability improvement project and completed several scheduled maintenance activities, Falcom Financial Services said in a report.

However, the weak price forecast for the company’s primary commodities may continue to keep margins under pressure in the near term, the brokerage added in the report.

SAFCO’s performance was dragged down by the subdued prices of urea and ammonia in 2019.

Moreover, weaker-than-expected equity income from Ibn-AlBaytar remained a concern, the report said adding that the company’s capex has been considerable in view of SAFCO’s scheduled enhancement projects.

Falcom expects SAFCO to post SAR 1.7 million net profit in FY 2020, a 15.5% year-on-year (YoY) increase.

The brokerage firm maintained its “neutral” recommendation on SAFCO, while raising the target price from SAR 74 to SAR 77 per share.