Itqan Cap says GASCO’s 2020 net profit exceeds expectations, maintains ‘Neutral’ rating

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National Gas and Industrialization Co.’s (GASCO) net profit of SAR 136.9 million in 2020 exceeded expectations, while the company’s operating profits missed forecasts, Itqan Capital said in an earnings review.

Accordingly, majority of the net profit came from non-operating investment income rather than operating income. GASCO is expected to achieve a sustainable growth in profits, driven by population growth and recovery in the industrial segment (mainly restaurants), which are forecast to boost their demand for liquefied petroleum gas (LPG) during 2021 due to improved business conditions compared to 2020. GASCO’s investment income is currently offsetting the decline in operating income, the brokerage firm indicated, noting that that the company's increased dependence on unsustainable investment income led to high fluctuations in profits over the coming years.

Itqan Capital maintained its ‘Neutral’ recommendation on the stock, while increasing the target price from SAR 30.10 to SAR 31.00.