Maaden’s Q2 beats estimates due to lower power costs: Al Rajhi Cap

Saudi Arabian Mining Company’s (Maaden) second-quarter net profit of SAR 517.8 million was above Al Rajhi Capital’s estimates mainly due to lower-than-expected increase in power costs in the aluminum segment and improved production efficiencies at other plants, the financial advisory firm said in an earnings review.

The company reported Q2 revenue at SAR 3.4 billion, missing Al Rajhi’s estimate of SAR 3.57 billion and consensus view of SAR 3.65 billion.

The top-line miss was due to weaker-than-expected sales volume, the report said.

“We had earlier factored in higher power costs for the aluminum segment post guidance by the company, which we now reverse till H1 2019 and, thereafter, model a gradual increase towards full costs by H1 2020,” Al Rajhi Capital said.

The brokerage said it is “positive” on Maaden’s long term growth prospects.

Maaden is expected to make a net profit of SAR 2.11 billion in 2018, an increase of 195 percent over 2017 profits. For 2019, Al Rajhi expects Maaden to record a profit of SAR 2.2 billion.

The advisory firm maintained its rating on Maaden stock at “underweight,” while revising the target price to SAR49.5 per share.

“The key upside risks could be attributed to higher-than-expected sales volume and material decline in cash costs, while weak commodity prices, unexpected increase in cash costs and rise in SAIBOR may act as the key downside triggers,” the report said.