Riyadh - Mubasher: Al Rajhi Capital remained its rating on Saudi International Petrochemical Company (Sipchem) at “Overweight,” with a target price (TP) of 20.04 per share.
Sipchem reported a jump in net profits by 101.2% in the fourth quarter of 2016 to SAR 52.3 million compared to SAR 26 million in the same quarter in 2015
The research firm said that the company's Q4 results were overall positive although they came below expectations due to lower than expected sales volume resulting in gross, operating and net profits coming lower than our estimate.
"Sipchem’s share price has rallied 37% in the last few months in-line with our overweight recommendation in November when it was trading at SAR 13," the report said.
Al Rajhi noted that although earnings will improve substantially in the coming year with a lag, the stock price has already risen in line with price of Methanol as IMC’s profit contributes bulk of group’s profit.
At current methanol price levels, based on Bloomberg consensus estimates, Methanex’s EBITDA margin would have likely improved more than the historical averages and thereby we do not expect major upside to methanol prices in the near term, Al Rajhi Capital added.
The report expected that Methanol price will remain elevated at-least until global Methanol output from low cost producers’ increases.
