Petrochem beats Q3 estimates on high operating rates: NCBC

National Petrochemical Co.'s (Petrochem) net profit rose 56 percent year-on-year (YoY) to SAR 307 million in Q3 2018, beating NCB Capital (NCBC) and consensus estimates of SAR 267 million and SAR 244 million, respectively.

"We believe better than expected results are driven by higher operating rates and lower Zakat," the brokerage said in a note on Monday.

Revenues came in at SAR 2.3 billion - the highest level since its inception -  higher NCBC’s estimates of SAR 2.2 billion. 

Petrochem’s operating rates stood at 116 percent versus NCBC's estimates of 109 percent and 97 percent for Q3 2017.

"We believe Petrochem’s ability to increase efficiency and thereby sustain high operating rates over the last four quarters is a key highlight of the results," the report noted.

Gross margin stood at 32 percent, in-line with NCBC’s estimates of 31.8 percent. 

Operating income stood at SAR 569 million, higher than the brokerage's estimates of SAR 523 million. Zakat expense came-in at SAR 58 million, significantly lower than the estimated SAR 65 million.

NCB Capital maintained a "neutral" rating on Petrochem, setting a price target of SAR 30.8.

"We believe the sustainable improvement in operating rates and higher dividends are the key catalysts for the stock," the report stated.