Sahara Petrochemical’s Q3 beats estimates, says NCBC

Sahara Petrochemical Co.’s net profit of SAR 165 million for Q3 2017, its highest net profit since Q2 2014, beat NCB Capital's estimate of SAR 118 million and the consensus forecasts of SAR 114 million.

“We believe the strong results are mainly attributed to record high operating rates of Al Waha, and the higher income from SEPC. This has mitigated the increasing losses of the acrylic project,” the brokerage said in an earnings report.

Income from investments in Q3 likely stood at SAR167 million, higher than the brokerage estimates of SAR 130 million, and the previous quarter’s SAR100 million.

Sahara subsidiary Al Waha is believed to have operated at 125 percent, compared to 100 percent a year earlier and the brokerage estimate of 105 percent, following a 33-day shutdown in H1. 

The company’s contribution to Sahara’s net income is estimated at SAR 71 million, compared to SAR 36 million in Q2 2017 and the estimate of SAR 48 million, the report said.

Meanwhile, SEPC is believed to have contributed SAR121 million to Sahara, higher than SAR 101 million in the previous quarter and the estimate of SAR 79 million. Margins likely stood at 37 percent, beating the brokerage’s projection of 27 percent.

NCBC estimates that selling, general and administrative (SG&A) expenses in Q3 came in at SAR 10.6 million, in-line with its estimate of SAR 9.9 million.

The brokerage maintained a “Neutral” rating on the stock with a target price of SAR 13.5 per share.

While the improvement in Al Waha’s operating rates and the higher income from SEPC are positive, the on-going losses at SAMAPCO and the acrylic facility are key risks.

Moreover, the lack of operational visibility is also a key concern for the valuation, NCBC added.