Al Rajhi Capital upgrades Sipchem, Advanced and Yansab ratings to ‘Overweight’

Al Rajhi Capital maintained its “neutral” rating on SABIC and SAFCO shares, while it upgraded its recommendation from “neutral” to “overweight” for Yansab, Advanced and Sipchem.

The brokerage firm, however, downgraded Tasnee from “neutral” to “underweight”.

Sipchem remains the best positioned in the market as it expects methane prices to improve; while Advanced Petrochemical is the best in term of dividends and profits.

It further expects Yansab to maintain the cash dividend of  1.75 per share during the second half of 2019, adding the company may “reduce it dividend during 2020 if the price didn’t recover”.

Petrochemical prices are expected to remain under pressure in the short term, due to weaker demand and fears from trade war.

“Weak demand for petrochemical products amid trade war concerns, along with new capacity additions have impacted demand supply balances in 2019, leading to decline in prices of key petrochemical products during the 9M 2019,” Al Rajhi Capital said.

“While petrochemical prices are mostly around the bottom, we do not expect an immediate recovery in prices in the near-term, given weak momentum in oil prices and the slowdown in end-markets such as automotive production. Nonetheless, we expect prices to start gradually recovering by H2 2020, on likely easing demand concerns due to possible trade agreement and slowdown in capacity additions,” it added.

The table below highlights Al Rajhi Capital recommendation towards a number of petrochemical companies shares it covers: