SABIC’s Q1 profit in line with forecast, says NCB Cap

Saudi Basic Industries Corp.'s (SABIC) net income of SAR 5.24 billion in Q1-2017 (up 80.1 percent YoY and 51.4 percent QoQ) came in line with NCB Capital and the consensus estimates of SAR 5.47 billion and SAR 5.4 billion, respectively.

Sales at SAR 37 billion also matched NCB Capital’s forecast, the brokerage said in an earnings review.

Gross margin stood at 37.2 percent in the first quarter, beating an estimate of 31.3 percent.

Operating expenses (opex) were above NCB Capital’s estimate of SAR 3.5 billion, reaching SAR 5.4 billion in Q1, due to reclassification of expenses to selling, general and administrative expenses.

“We believe higher than expected gross margin was mitigated by higher opex,” the brokerage firm added.

Key upsides are higher operational efficiency, strong balance sheet and attractive dividend yield at 5 percent.

NCB capital reaffirmed its “neutral” rating on SABIC, keeping the stock’s target price unchanged at SAR 90.