Yansab’s Q4 beat estimates on higher operating rates, petchem prices: NCBC

Yanbu National Petrochemical Co.’s (Yansab) net profit of SAR 780 million for Q4 2017 beat NCB Capital and consensus estimates of SAR 677 million and SAR 627 million, respectively.

“We believe the better than expected results are attributed to higher operating rates and petrochemical prices,” NCB Capital said in an earnings review on Sunday.

Yansab’s revenue for the quarter rose 12.1 percent to SAR 2.17 billion, the highest revenue recorded since Q4 2014, and 6 percent higher than NCB Capital’s estimate of SAR 2.05 billion.

Based on NCB's calculations, Yansab facilities operated at 101 percent in Q4 2017, higher than the research firm’s expectation of 95 percent.

“We believe the improvement in operating rates is due to operational efficiency following the 10-21 days shutdowns at the olefins and EG facilities in Q2 2017,” the report said.

Gross profit for the quarter stood at SAR 896 million, 9.4 percent higher than NCB Capital’s estimate of SAR 819mn.

Gross margin came in at 41.4 percent, higher than estimates of 40.1 percent and 40.4 percent in Q3. The variation was attributed to higher than expected revenues.

In terms of petrochemical prices, polypropylene (PP) prices increased 6.9 percent quarter-on-quarter (up 11.1 percent YoY) to $1,141, while high-density polyethylene (HDPE) prices increased 10.4 percent QoQ and 8.3 percent YoY to $1,241.

MEG prices increased 3.1 percent QoQ and 23.9 percent YoY to $909. PP-propane spread declined 12.6 percent QoQ (down 12.8 percent YoY) to $598.

NCB Capital assigned an "overweight" rating on Yanbu National Petrochemical Co.’s (Yansab), setting the 12-month price target at SAR 64.7 a share.

The stock’s key positives are improvement in operational efficiency following a shutdown in Q2; expansion at the ethylene glycol (EG) unit expected in 2019; strong balance sheet with a net cash positive position; and attractive dividend yield of 5.5 percent expected in 2018, the report said.