Aljazira Cap maintains “Neutral” recommendation on Eastern Cement, revises TP to SAR 37.1/share

Eastern Province Cement Co.’s net income of SAR 30.5 million in Q2 2020 came below Aljazira Capital’s and consensus estimates of SAR 36.2 million and SAR 37 million, respectively, due to lower sales volume, the brokerage firm said in an earnings review.

The report said cement sector will face some short-term challenges, impacting dispatches, however outlook is expected to improve in the mid to long term.

The brokerage firm doesn’t expect any price war among players due to the recognized impacts on the companies’ financials during the price war era.

Aljazira Capital expects the company to generate a strong free cash flow of SAR 233.2 million, increasing the possibility to maintain dividend per share at SAR 1.50/share during FY20, supported by a strong balance sheet and zero debt.

The brokerage firm expects Eastern cement to post SAR 216.3 million in net income for FY20, an increase of 19.7% year-on-year.

Aljazira Capital maintained its “Neutral” recommendation on the stock with a revised target price (TP) at SAR 37.1 per share.