Qassim Cement’s Q4 profit beat estimates: Al Rajhi Cap

Qassim Cement Co. reported a net profit of SAR 40 million for Q4 2018, beating Al Rajhi Capital and consensus estimates' of SAR 6 million and SAR 14.5, respectively, the brokerage said in an earnings review on Wednesday.

Revenue came in at SAR 115 million, above the brokerage and consensus estimates' of SAR 75 million and SAR 94.7 million, primarily on account of higher-than-expected average cement sales prices.

While production and sales volume improved 8 percent quarter-on-quarter (QoQ), in line with Al Rajhi's expectation, average cement sales prices jumped 41 percent QoQ in Q4.

"We don’t believe the sharp increase in average sales prices is a result of demand improvement as the quantity sold only increased marginally, but it’s because the company focuses on high pricing strategy," the note said.

The company’s market share, however, slightly declined to 6.7 percent in Q4 from 7.1 percent in Q3, due to stiff competition in the market.

"Going forward, we expect Qassim’s sales volume to improve only marginally, whereas average cement prices are likely to remain at the current level as cement producers are now focused more on pricing rather than volume," the note added.

Al Rajhi Capital maintained "neutral" rating on the stock, setting the target price at SAR 33.5 a share.