Southern Cement's Q3 2020 profit in line with estimates; TP at SAR 78: AlJazira Cap

Southern Province Cement Co.’s Q3 2020 net profit of SAR 150 million came in line with estimates of SAR 151.5 million, but fell below consensus forecast of SAR 156.9 million, AlJazira Capital said in a recent report.

"Southern Cement dispatches unexpectedly increased by 46.8% YoY in Q3 2020, while domestic price per ton increased to stand at SAR 213/ton, and is expected to sustain the high level," AlJazira Capital said.

It added that the cement producer will likely maintain its high export sales at 455,000 tons in 2020, which can potentially result in revenues in excess of SAR 41 million.

The report said that the cement sector recovered quickly from losses resulting from the COVID-19 pandemic and the increase in value-added tax (VAT), due to an increase in mortgage loans.

According to the brokerage firm, the company's profit is likely to rise by 41% to SAR 650.1 million in 2020, and to SAR 681.8 million in 2021.

AlJazira Capital updated its recommendation on the stock to “Overweight,” setting a target price (TP) at SAR 78.

The “Overweight” rating implies that the stock is currently trading at a discount to its 12 months target price, which will typically provide an upside potential of over 10% from the current price levels over next 12 months, according to the brokerage firm.