Sahara’s Q1 in-line with estimates, says Aljazira Cap

Sahara Petrochemical Co.’s net profit of SAR 140.2 million for the first quarter of 2018 came in-line with Aljazira Capital and the market consensus estimates of SAR 137 million and SAR 138.6 million, respectively.

The improved result can be mainly attributed to high operating rate in Al-Waha Plant, higher than expected earnings from Tasnee and Sahara Olefins Company (TSOC), and improvement in average sales prices, Aljazira Capital said in an earnings review.

Income from associates is expected to stand at SAR 158.5 million, higher than the estimates of SAR 154.8 million.

Meanwhile, SAAC is expected to maintain its losses in 2018 with a loss of SAR 70 million, compared to losses of SAR 103.4 million last year.

However, the operational improvement of associates’ facilities is considered as a key catalyst for this year growth, along with better product prices, Aljazira Capital said.

According to the report, the plants shutdown in the first half of 2017 is believed to have had a positive impact on AlWaha’s performance, while further improvement is expected in other associates’ operating rate in Q2 2018 and onward.

Looking ahead, Sahara will likely continue to focus on production efficiency and cost optimization to mitigate the impact on SAAC and SAMAPCO performance.

The company is expected to post net profit of SAR 580.3 million for fiscal year 2018, up 30.6 percent year-on-year supported by higher operating rate of Al-Waha plant and improved performance of other associated companies, as well as the impact of SAAC’s impairment losses during 2017 (SAR 43.6 million).

Aljazira Capital maintained a “Neutral” rating on the stock with a target price of SAR 17.20 per share.