Cairo - Mubasher: Pharos Research has maintained its “Overweight” recommendation on the stock of Sidi Kerir Petrochemicals (Sidpec) with a target price (TP) valuation of EGP 42.80 per share.

The research firm said that feedstock quality remains an issue for the company as it continues to strain margins in the third quarter.

Pharos also presumes the effect of the USD 27 million Amine unit investment in 2017, which was expected to improve feedstock quality, is yet to kick in or has been overshadowed by further deterioration in feedstock quality.

However, management have stated that neither feedstock quality nor availability played a role in the contraction, and indicated that the contraction was a result of a one-off cost.

Sidpec reported a 31% year-on-year rise in profits for the first nine months of 2018 due to a growth in production and sales.

The company has logged EGP 922 million in profits for the nine-month period ended September, versus EGP 703 million in the prior-year period, according to a filing to the Egyptian Exchange (EGX).

Meanwhile, sales grew to EGP 4.2 billion, compared to EGP 3.3 billion in the same period a year earlier.

The increase in profits was mainly driven by the growth in production and sales, as well as the increase in the average cost of sale during the period, the company said.

Sidpec previously posted a net profit of EGP 681 million in the first half of the current year, versus EGP 607 million in the year-ago period.