Mubasher: NCB Capital assigned a “Neutral” recommendation on the stock of Qassim Cement with a price target (PT) of SAR 71 a share and a price-earnings ratio (P/E Ratio) of 12.3x, according to a report by the research agency on Sunday.
This outlook is driven by the slide that the company saw over the first six months of the fiscal year 2016 thanks to higher costs and weaker sales.
In the second quarter of 2016, the company’s net earnings declined 31.43% year-over-year (YOY) to SAR 115.3 million from SAR 168.2 million.
On a six month basis, SAR 250.7 million net profits were registered during the first half ended on 30 June, compared with SAR 330.8 million for the year-ago period.
“We believe the YoY decline is attributed to an increase in fuel prices and seasonality due to a higher number of Ramadan days coinciding in June 2016 vs. June 2015. We believe selling prices stood at SR218/ton in 2Q16 (-4% YoY), with clinker production cuts helping in limiting the discounts offered”, said the firm.
Further, the research firm expected cash dividend distribution to decline during 2016, but the dividend yield remains, however, attractive at 8.1%.
All in all, the research agency believes that other cement companies will experience similar declines in Q2-16 earnings due to seasonality and higher fuel costs, expecting sales to fall by 5.0% in 2016.
