Yansab Q1 in-line with estimates, says NCB Cap

Yanbu National Petrochemical Co. (Yansab) Q1 2017 net profit of SAR 608 million was in-line with NCB Capital’s estimates, but was 4.4 percent lower than the consensus estimate of SAR 636 million, the brokerage said in an earnings review on Wednesday. note.

The petrochemical firm’s profit rose 44.2 percent year-on-year (YoY), with gross margin expansion offsetting lower-than-expected operating rates and higher opex, the report said.

Revenues came in at SAR 1.76 billion, 12.6 percent lower than NCB Capital’s estimate.

Based on the brokerage’s calculations, Yansab’s facilities operated at 84 percent in the first quarter.

“We believe lower operating rates is due to preparation for shutdown in 2Q17. Yansab announced a shutdown at its ethylene glycol (EG) and olefins facility for 21 days and 10 days, respectively,” the report said.

Gross margin stood at 41.4 percent in Q1, higher than NCB Capital’s estimate of 37.3 percent. Higher operational efficiency and improved EG prices mitigated the impact of lower operating rates and declining PP-propane spreads.

“Improving petrochemical prices, strong balance sheet and an attractive dividend yield of 5.1 percent are the key strengths of the stocks. However, the shutdown at the EG facility is a key risk,” the investment arm of the National Commercial Bank (NCB) added.

NCB Capital set the stock’s target price at SAR 50.4, and recommended an “Overweight” rating.