Yansab’s Q3 net profit in-line with estimates on higher operating rates, says NCB Capital

Yanbu National Petrochemical Co.’s (Yansab) net profit of SAR 645 million in Q3 2017 came in-line with NCB Capital estimates, but beat the consensus projection of SAR 578 million.

“We believe the better than expected results are attributed to higher operating rates and petrochemical prices,” NCB Capital said in an earnings report.

Revenues stood at SAR1.93 billion in Q3, 6.4 percent higher than the brokerage’s estimate of SAR 1.82 billion, marking Yansab’s highest revenue record since Q4 2014.

Based on NCB Capital’s calculations, Yansab facilities operated at 96 percent in Q3, higher than the brokerage’s estimate of 90 percent and compared to 70 percent the previous quarter.

“We believe the improvement in operating rates is due to operational efficiency following to the 10-21 days shutdowns at the olefins and EG facilities in Q2 2017,” the report said.

Gross profit reached SAR 780 million, broadly in-line with the expected SAR 800 million, while gross margin came in at 40.4 percent, missing the estimates of 44.1 percent.

The variance in gross margins is believed to be due to higher cost of sales, which might be impacted by the shutdown in the previous quarter.

NCB Capital kept an “Overweight” rating on the stock with a target price of SAR 64.7 per share.

“The stock’s key positives include the improvement in operational efficiency following shutdown in Q2, the expected expansion at the EG unit in 2019, a strong balance sheet with a net cash positive position and an attractive dividend yield of 6.4 percent,” it said.