Qassim Cement Q4 net profit below estimates, rating ‘Neutral’: Aljazira Cap

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Qassim Cement Co.’s net profit for Q4 2020 of SAR 113.1 million fell below Aljazira Capital and consensus estimates of SAR 128.3 million and SAR 124.9 million, respectively, the brokerage firm said in an earnings review.

The lower-than-estimated earnings came as price realization per ton fell below expectation.

Qassim Cement’s selling prices plunged 37.6% year-on-year (YoY) as the decline in realization per ton continued for two quarters, due to the impact of value-added tax (VAT).

“We believe selling prices will sustain the low level for one to two quarters before recovering,” the report said.

Cement sector is expected to show a short-term decline in net income due to selling price discount, the report added, indicating that Aljazira Capital is optimistic on the sector in the long-term with the increase in mortgage loans in 2020, and the future demand of cement from giga projects.

Qassim Cement is expected to post SAR 452.1 million in net income in fiscal year 2021, and to pay dividend of SAR 4.5/share owing to its strong balance sheet and zero debt.

The firm maintained a “neutral” recommendation on the stock with a target price of SAR 74.6/share.