SABIC Q1 2021 financials beat forecasts: Aljazira Capital

Saudi Basic Industries Co. (SABIC) posted strong financial results for the first quarter of 2021, beating Aljazira Capital and market consensus estimates.

"Thus, we remain positive on the company’s growth prospects, given its operating efficiency amid improving market dynamics, and strong cash flow," the research firm said.

The giant petrochemical producer positively surprised the market by reporting strong margin improvement, despite an increase in feedstock cost and 8% decline in sales volume.

Despite lower sales volume, the company showed resilient operating performance and sufficient cost control.

"We believe such strong financials is a continuation of a healthy recovery from the impact seen during last few quarters amid the pandemic," Aljazira Capital said, adding that the short-term outlook is largely driven by coronavirus vaccines, tight global supply, and bullish downstream markets.

The report issuer expects margin stability during Q2 2021, as sales volume is likely to be even stronger on the back of healthy demand.

"Going forward, products prices are expected to stabilize around the current level with the pick-up in the global economic activities and we don’t expect a significant improvement during 2021 due to expected addition in global capacity," Aljazira Capital said.

Thus, the research firm remains positive on the company’s growth prospects, given its operating efficiency amid improving market dynamics, and strong cash flow.

SABIC is expected to post a net profit after Zakat and tax of SAR 19.58 billion in 2021, compared with SAR 66.8 million in 2020.

Aljazira Capital maintained its “Neutral” recommendation on the stock, with a revised target price of SAR 112.0 per share.