Advanced Q1 2019 profit ‘largely’ in line, says Al Rajhi Cap

Advanced Petrochemical Co.’s Q1 2019 net profit of SAR 162 million was “largely” in line with Al Rajhi Capital’s estimates, the brokerage firm said in an earnings review on Wednesday.

Standing at SAR 648 million, the first-quarter revenue beat expectations, despite a ten-day unplanned shutdown.

In February, the company also shut down its propylene plant for critical reliability improvements, but it managed to mitigate the impact through higher inventory usage and propylene imports leading to only a marginal decline in operating rates.

Gross profit margins expanded in Q1 to 29.9 percent, which could be attributable to lower propane price (-22.5 percent on a quarterly basis) and improved production efficiencies.

“Overall, we believe the company’s operating performance continues to remain Healthy… In addition, the company offers an attractive dividend yield of 5.4 percent, which is above sector average," Al Rajhi Capital noted.

Meanwhile, Al Rajhi Capital remained "neutral" on the stock, fixing its target price at SAR 57.

"The key upside trigger might be attributed to an increase in dividends (we expect an increase in DPS to SAR3/share for 2019) while further weakness in product spreads may act as the key downside trigger," the report added.