Falcom maintains “Neutral” rating on Yansab stock, cuts TP to SAR 55.60/share

Falcom Financial Services maintained its “Neutral” rating on Yanbu National Petrochemicals Co. (Yansab), and revised down its target price (TP) to SAR 55.60/share from SAR 62.

“Yansab’s FY19 net profit shrank 54.9% year-on-year (YoY) to SAR 1.1 billion on lower average sales prices for all products,” the brokerage firm said in a research note.

Also, persistent weakness in the prices of the company’s products led to a disappointing set of results, it clarified, noting that though Yansab did manage to contain the operating expense, higher-than-expected cost of sales led to a decline in the gross and operating margins.

Falcom expects the oil prices to remain subdued in 2020, which will keep Yansab’s revenue and net profit growth under control.

“The financial fundamentals of Yansab are still strong with negligible debt on its balance sheet,” the firm said.

Yansab's profit is projected to rise 19% YoY to reach SAR 1.3 billion in 2020 compared to SAR 1.09 billion a year earlier, Falcom said.