Al Rajhi Cap initiates coverage of Saudi Aramco with “Neutral” rating; sets TP at SAR 37.5/share

Al Rajhi Capital initiated the coverage for Saudi Aramco’s shares with a “Neutral” recommendation and target price (TP) of SAR 37.5 per share.

The brokerage firm said in a research note that Saudi Aramco will distribute $80 billion (SAR 300 billion) dividend for 2020, implying yields ranging from 3.6% (based on local market examples) to 4.6% (based on US peers).

“The factors that could move its valuation upwards include higher than expected oil and gas prices; higher market share gains as weaker competitors exit; improved macro-economic growth; further captive expansion opportunities; and higher than expected decline in local energy consumption leading to increase in export volumes,” the note said.

The firm also expects Saudi Aramco to generate a total revenue of SAR 1,216 billion in 2019, and SAR 1,276 billion in 2020 respectively, taking into account SABIC’s shares.

“It also expected from Saudi Aramco to post a net profit of SAR 361 billion and SAR 401 billion in 2019 and 2020 respectively,” the note said.