Advanced Q2 net profit in-line with estimates: Al Rajhi Capital

Advanced Petrochemicals Co.’s Q2 earnings of SAR 192 million came in-line with Al Rajhi Capital estimates but has beaten consensus estimate of SAR 174 million, the firm said in an earnings review.

Revenue came slightly below estimates at SAR 681 million, mainly due to lower-than expected sales volume. The company, however, witnessed a 30 percent quarter-on-quarter (QoQ) decline in fixed production costs, leading to beat at the gross profit level.

Sales volumes dropped 3 percent year-on-year (YoY) in Q2, leading to lower than expected topline.

Equity income fell in Q2 much below expectation amid low product spreads.

Subsidiary Advanced Global Investment Company (AGIC) has recently inked a memorandum of understanding (MoU) with SK Gas Co. Ltd for the construction of PDH and PP plants in Jubail Industrial City in Saudi Arabia, which ensures Advanced long-term growth.

“The company is likely to witness an improvement in product spreads due to steady PP prices and lower propane prices in the coming months,” the report said.

Additionally, the company offers an attractive dividend yield of 4.8 percent, which is above the sector’ average.

Al Rajhi Capital recommended a “Neutral” rating on the stock with a target price of SAR 59 per share.