Falcom affirms ‘underweight’ rating on Saudi Cement

Falcom Financial Services maintained its “underweight” recommendation on Saudi Cement Co., keeping the stock target price unchanged at SAR 56, the investment bank said in a recent report.

Saudi Arabia’s 2019 national budget provides higher allocation toward infrastructure spending, which is expected to boost demand for construction materials such as cement.

“The positive upturn in the sector performance since the start of 2019 stems from the improved average selling price of cement and higher cement dispatches on an annual basis that gave the much needed boost to the company’s topline,” Falcom added.

However, operating expenses and cost of sales remained high, continuing to weigh negatively on profit margins.

The company’s Q2 2019 profit was lifted by improved sales volume and prices, but missed consensus estimates.

The cement producer is expected to post net profit of SAR 478.7 million this year, compared to net profit of SAR 400.5 million in 2018.

Revenue is also likely to jump 30.7 percent year-on-year to SAR 1.46 billion in 2019.

Falcom added that it foresees limited upside potential given the recent rally in the stock price.