Riyadh-Mubasher: Higher feedstock cost, electricity and fuel prices will impact Sipchem's net profits by around SAR 120 million in 2016, AlJazira Capital said in a report.
Sipchem's net income would decline by about 25.6% in 2016 to SAR 345.9 million from earlier estimate of SAR 465.1 million, the think tank said.
The Saudi government recently raised natural gas, fuel, petchem feedstock and electricity prices to curb deficit. It increased the ethane prices from earlier fixed subsidised rate of $0.75 per mmbtu to $1.75 per mmbtu and methane/natural gas from $0.75 per mmbtu to $1.25 per mmbtu.
This change is expected to increase feedstock prices for petchem players, the research firm said.
It added that the higher prices of electricity and fuel gas are expected to increase the production costs by about SAR 120 million.
"We have reworked our financial model assumptions to incorporate the impact of these changes. Currently, our assumption for OPEC crude oil basket for 2016 stands at $53.5 per barrel," AlJazira Capital said.
It recommended 'Overweight' on the stock, setting the price target at SAR 13.90.
