Borouge offers strong value for investors with 7% dividend yield and industry outperformance

Logo of Borouge

As the second quarter results season approaches, Abu Dhabi-based Borouge is likely to continue its record as the absolute outperformer in the global petrochemicals sector. At the same time, shares in the company are currently offering investors substantial value, providing a dividend yield of almost 7%, while analysts also predict a strong price performance as international market conditions improve.

The Company is one of the world’s most efficient polyolefins producers, and its superior technology and innovation are driving a high price premium for its products in key growth markets in Asia Pacific, the Middle East and Africa.

Reflecting these competitive advantages, Borouge’s EBITDA margin stood at 44% in the first quarter – one of the highest in the industry, compared to between 11% and 28% for comparable international petrochemicals companies. The company has proven extremely resilient over the past year, with first quarter net profit increasing 37% year-on-year and beating analyst estimates. 

In a recent research note, Arqaam Capital said: “Borouge has built a highly attractive global polyolefins platform over the years, pursuing sizeable and well-identified avenues of growth, and expanding capacity almost every five years.”

Currently, five analysts have a “buy” recommendation on Borouge shares, and five have a “hold” rating. Arqaam has a price target of AED 3.34 per share, representing upside of 43% on the current share price[1]. Interestingly, Borouge is one of the few petrochemical companies among its direct peer set to not have a “sell” rating from analysts.

Leveraging its strong cash generation, cash conversion and healthy balance sheet, Borouge has committed to again pay a cash dividend of US$1.3 billion in the 2024 financial year, which equates to a current yield of 6.8%.

The company, which has been consistently highly profitable since its establishment in 1998, is also poised for transformational expansion, with the new Borouge 4 plant due to raise production capacity by 28% when it is completed at the end of 2025. Upon completion in 2025, will generate an estimated US$1.5 billion to US$1.9 billion of additional  revenue annually after full production ramp-up of the plant. Internationally, the company is also pursuing accelerated growth, including a significant opportunity in the Asia Pacific region that has reached feasibility stage.

Al Ramz analyst Shadab Ashfaq commented in a recent note, “We maintain our overweight rating on the stock. The company remains appealing to us considering the anticipated increase in volume from Borouge 4, its strong margins, its high dividend yield, and the backing of ADNOC.”