NCB Capital, Saudi Arabia’s largest investment bank and leading GCC wealth manager, said in a new report issued today that a positive outlook driven by strong prices and demand coupled with attractive valuation will benefit SABIC. The bank kept its overweight rating for SABIC with a slightly higher price target of SR128.6
“Our positive outlook for prices, contribution from new capacities which started in 2010, and the commercial start of key units of Saudi Kayan in 3Q11, we believe will drive SABIC’s earnings in 2011,” said Tariq Al-Alaiwat, Equity Research Analyst in NCB Capital. “We estimate 2011E revenues of SR190.5 billion, up 25% YoY, with a net income of SR31.2 billion, up 45% YoY.”
SABIC is a leading global petrochemical player with a broad product range, integrated production flow and low cost feedstock advantage. A strong presence in emerging markets and a generally robust pricing environment support the upside potential for the stock. The company has had a strong start to the year with 1Q11 net income of SR7.7 billion, the highest quarterly earnings in its history
The SABIC-Sinopec JV signed MoU is for building a polycarbonate plant at their Tianjin complex that will have a capacity of 260k mtpa and is expected to start by 2015.
“This will be SABIC’s second polycarbonate plant” added Mr. Al-Alaiwat, “The first is located in the Saudi Kayan complex and also has a production capacity of 260k mtpa. Polycarbonate finds application in manufacturing automotive parts and consumer products. Saudi Kayan’s facility will be the first plant producing polycarbonate in the region. This new plant coming up in China will strengthen SABIC’s presence in the growing Asian markets.”
NCB Capital was voted best research house in three categories in Euromoney’s annual Middle East research survey for 2010. The bank achieved a total of 10 ranked positions in this year's survey, the third highest amongst all research firms in the region. On the basis of top ranked positions, the firm achieved the second highest total in the region.
The bank provides analysis on the banks, telecoms, agriculture and food, cement, construction, industrial, petrochemical, consumer goods/retail, and utilities sectors; the only domestically-owned investment bank to offer such a range.