Aljazira Cap expects Tasnee to post SAR 161 mln loss in 2020, turn to profit next year

National Industrialization Co. (Tasnee) is expected to post a net loss of SAR 160.9 million (SAR 0.24 loss per share) for financial year 2020, before switching to profitability during FY2021 with a net income of SAR 276.6 million (0.41 EPS), AlJazira Capital said in an earnings report.

AlJazira Capital said Tasnee missed its earnings estimates for Q2 2020, posting a weak financial result for the period with a net loss of SAR 188.8 million.

The brokerage had expected the Saudi-listed firm to post a net profit of SAR 17.5 million, while market consensus estimated a profit of SAR 1.1 million for the second quarter this year.

The company’s performance in Q2 2020 was affected by one-off impact related to its subsidiary Advanced Metal Industries Co. (AMIC) assets, along with low sales contribution from Saudi Polyolefins Co. (SPC) and Saudi Ethylene and Polyethylene Co. (SEPC) due to global slowdown in demand with the COVID-19, AlJazira Capital said.

Tasnee has also been affected by the decline in domestic demand following the lockdown periods, as a high percentage of its sales target the local market.

The impairment loss for Jazan Slager plant amounting to SAR 204 million as compared to SAR 195 million in H1 2019 continue to be a key concern in the short term, the brokerage said.

AlJazira Capital said although it expects Q2 2020 to be the lowest for Tasnee and other petrochemical players, oversupply market appears challenging until FY2024.

AlJazira Capital maintained its “Neutral” recommendation on the stock with a target price of SAR 11.30 per share.