Falcom reduces Saudi Kayan’s target price to SAR 12 per share

Falcom Financial Services reduced the target price of Saudi Kayan Petrochemicals Co. (Saudi Kayan) to SAR 12 per share, maintaining the “Overweight” rating on the stock.

The brokerage firm said in a note that Kayan is focusing on generating positive cash and minimizing its existing debts, which is likely to benefit the company’s bottom line growth.

“The company saw a positive impact of debt-reducing measures implemented in the previous quarter, which helped to substantially decrease its finance cost as a result of lower Sibor rates,” Falcom said.

It added that Kayan targets enhancing its financial competency through repaying and restructuring its remaining secondary debts.

“A surprise drop in feedstock prices, higher sales volumes, production efficiency, and lower financing charges were responsible for the company’s return to profitability in Q3 2019, after reporting losses for 3 straight quarters,” the brokerage company stated.

However, feedstock prices are projected to grow over the coming quarters, resulting in lower margin spreads of products.