SABIC likely to see 2018 earnings jump 25%: NCBC

Saudi Basic Industries Corp. (SABIC) is expected to report a net profit of SAR 23 billion in 2018, a 24.9 percent year-on-year (YoY) increase, NCB Capital (NCBC) said in an earnings forecast.

The increased profit can be attributed to a 16.6 percent YoY increase in sales, driven by higher operating rates and higher prices, the brokerage firm said.

In addition, financing charges is likely to drop by 50.8 percent YoY, the report added.

“The key strengths of the stock are a strong balance sheet, ability to control costs and wide global reach,” NCBC said. “However, the progress of selling 70 percent of SABIC to Saudi Aramco is expected to be the key stock driver.”

The stock currently is trading at 2019E PE of 14.9x higher than the group peer average of 12.0x.

NCBC maintained a “neutral” rating on the stock with a target price of SAR 121.2 per share.