Arabian Cement’s Q3 profit beats estimates: Al Rajhi Cap

Arabian Cement’s Q3 2018 net profit of SAR 14.1 million was higher than Al Rajhi Capital’s and consensus net loss estimates of SAR 30.6 million and SAR 29.6 million, respectively.

The divergence can mainly be attributable to lower than expected costs, the brokerage firm noted in its earnings review.

Revenue came in at SAR 118 million, above Al Rajhi Capital’s estimate of SAR 107 million, largely on the back of higher average realized price of SAR 146/ton (+16 percent year-on-year, +13 percent quarter-on-quarter).

The company’s outlook remains negative in the backdrop of declining sales and high inventory build-up amid no tangible signs of recovery in the market, Al Rajhi Capital noted.

However, slight recovery of the Jordanian market should partially offset the overall decline as its Jordanian operations (Qatrana Cement) recorded a higher than estimated net profit of SAR 9 million in Q3 2018 (Q3 2017: SAR 25.4 million, Q2 2018: SAR -52.2 million).

“Our revised estimates gives a target price of SAR 20.5/share, implying 18 percent downside from the current levels,” the brokerage noted while remaining Underweight on the stock.