NBK capital has reduced its recommendation for shares in Saudi Basic Industries Corporation (Sabic) to hold from buy an forecast a fall in the company’s 2016 and 2017 profits.
“We have reduced our fair value for Sabic to SR 93.40 a share (from SR 95.30 a share) and downgraded our recommendation on the stock from buy to hold (upside potential: 14 per cent),” NBK Capital said in a reported. “Sabic has outperformed the broader Saudi Petrochemical Index (Sasepetr) by roughly 20 per cent in the year to date; however, looking ahead, we believe that the company lacks catalysts to outperform its major regional peers in the short term.”
Sabic reported net income of SR 15.7 billion for the first nine months of 2015, which was 18 per cent down year-on-year. This beat the market consensus by more than 28 per cent.
“We have increased our 2015 forecast net income by about 8 per cent, driven primarily by the third quarter 2015 earnings beat,” NBK Capital said. “We have cut our 2016 forecast and 2017 forecast earnings by 1 per cent each as a result of slightly lower product price realization forecasts that were broadly offset by improved margin expectations for the company’s global operations.”