Saudi Ceramic Q4 2020 profit below estimates: Al Rajhi Capital

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Saudi Ceramic Co.’s Q4 2020 net profit of SAR 28 million came below Al Rajhi Capital’s estimates of SAR 37 million, the brokerage firm said in an earnings review.

The company’s Q4 2020 revenue of SAR 368 million was 11% lower than Al Rajhi Capital’s estimates of SAR 414 million.

Revenue was backed by the price hike taken by the company at the beginning of Q4 2020, though it seems to have been impacted by volumes that were lower than expectations.

Al Rajhi Capital remains bullish on the company on the back of continued strong demand for housing projects, despite weak Q4 2020 volumes. Added to this, the company is one of the largest players in the region with an attractive market share in the Kingdom.

The brokerage firm also indicated that the recent steps taken by the government to curb cheap imports from China and India give Saudi Ceramic a strong pricing power. With an improvement in revenue, the potential for Saudi Ceramic’s margins is expected to improve, on the back of improved operating leverage.

Al Rajhi Capital expects Saudi Ceramic to post SAR 177 million net profit in 2020, and SAR 276 million in 2022.

The firm maintained its "Overweight" rating on the stock, raising its target price (TP) to SAR 62 per share.

The "Overweight" rating means that the target price is more than 10% above the current share price, and the share price is expected to reach the target on a 12-month time horizon, according to Al Rajhi Capital.