Petro Rabigh’s Q3 widely beat estimates on higher margins: Riyad Cap

Rabigh Refining and Petrochemical Company’s (Petro Rabigh) net profit of SAR 706 million for the third quarter of 2017 has massively exceeded Riyad Capital’s estimates of a net loss of SAR 20 million.

The comapny has managed to grow its net profits on the back of gross margins exceeding 12 percent, a record high, the brokerage said in an earnings review.

Revenue increased 43 percent year-on-year (YoY) and 3 percent quarter-on-quarter (QoQ) to SAR 9.1 billion, which came close to Riyad Capital’s forecast of SAR 8.9 billion.

“We expect continued rise in operational performance has benefitted the company with volumetric growth at both the refinery and the petrochemical segment,” the brokerage said.

Petro Rabigh benefitted from expanding refining margins during the quarter, as Hurricane Harvey led to a sharp rise in refinery margins in the US.

“However, gross margins at 12.1 percent were unanticipated given the previous high of 8.7 percent in good times,” the report said.

As a result of petrochemical margins rising sector-wide, gross profit stood at a record-high of SAR 1.1 billion, compared to SAR 25 million a year earlier and SAR 635 million in the previous quarter.

Operating profit more than doubled in Q3 to SAR 810 million when compared to Q2.

Petro Rabigh announced the scheduled shutdown of its VGO unit for 32 days beginning Oct. 4, which will have a financial impact in Q4, Riyad Capital said, adding that contribution from Petro Rabigh II is an upcoming positive trigger.

The brokerage firm recommended a “Neutral” rating on the stock with a target price of SAR 16 per share.