Tasnee’s Q1 tops estimates on lower production costs: Aljazira Cap

National Industrialization Co.’s (Tasnee) first-quarter net profit of SAR 361.4 million (up 249.9 percent YoY and 10.3 percent QoQ), beat Aljazira Capital’s and market consensus profits estimates of SAR 285.5 million and SAR 280.5 million, respectively, Aljazira Cap said in a report.

The YoY strong performance was primarily attributed to an increase in average sales prices of Titanium Dioxide products; despite lower than expected operating rate, in addition to the decline in financial charges.

The deviation of Q1 2018 earnings from the estimates was attributed mainly to lower than expected production cost due to higher spreads in Tio2 product and lower than expected minority interest, the brokerage said.

Aljazira Capital maintained its “neutral” recommendation on the stock with a target price of SAR 20.50.

The firm also remained optimistic on Tasnee’s mid and long term performance, based on deal closing with Tronox Ltd Co.

“As we expect earnings to improve on Cristal sales, lower financial charges, lower OPEX and cancellation of tax on income, which could improve margins and enhance the company’s performance,” the report said.

Tasnee is expected to post SAR 1.41 billion in net income in Q2 2018, due to higher average sales prices and improved income from associates and margins.