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Saudi Cement Co.’s Q4 2020 net profit of SAR 129.4 million came below AlJazira Capital and consensus estimates of SAR 153.9 million and SAR 138 million, respectively, due to lower-than-expected price realization per ton, the brokerage said in an earnings review.
AlJazira Capital expects the selling price will remain low in the coming two quarters, due to adjustment in price as a result of the value-added tax (VAT). The producers instead of passing on the VAT seem to be absorbing the impact. This can create an opportunity for long-term investors as high demand for cement will eventually push selling prices, the report added.
The company lost some of its market share in the past 12 months, reaching 10.4% from 11.5% in the previous corresponding period.
“We believe cement sector will show a short-term decline in net income due to selling price discount. However, we are optimistic on the sector for the long-term with the increase in mortgage loans and the future demand from giga projects,” AlJazira Capital said.
Saudi Cement is seen to report a net profit of SAR 477.6 million for 2021 (SAR 3.12/share), a 4.5% year-on-year (YoY) increase, the report included.
AlJazira Capital maintained its “Neutral” recommendation on Saudi Cement with a target price (TP) at SAR 53.80 per share.
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