Sipchem, one of the largest companies in the petrochemical sector in Saudi Arabia, posted a quarterly net profit in Q3, the first in the last four quarters, aided by improvement in product prices and a recovery in demand post easing lockdowns.
However, Q3 earnings missed analyst’s forecast and market expectations despite a strong beat in the topline, according to Al Rajhi Capital Research.
While details are not fully known, it is suspected that this could have been because of marketing revenues and mostly similar extent of costs as gross profit came broadly in line with estimates.
Methanol prices are up on a sustainable recovery trend, up by ~11% q-o-q in Q3, on the back of tight supply due to unexpected production outages in Southeast Asia and the Middle East along with an improvement in demand, mainly from the MTO (made to order) and pharmaceutical sectors (source: ICIS).
Methanol prices continue to maintain its upward trend in Q4 so far, rising ~14% q-o-q, indicating an improving the Methanol market fundamentals. However, the stock price has already gained ~30% since March, and consensus estimates do not factor material improvement in earnings.
While the company’s announcement of a share repurchase programme may have improved sentiments, it may lead to no dividends for 2020. Accordingly, Al Rajhi maintains TP (trading price) at SR12/sh and rating for the stock. -- Tradearabia News Service