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Al Rajhi Capital raises Advanced Petrochemical TP to SAR 58/shr

Al Rajhi Capital raises Advanced Petrochemical TP to SAR 58/shr
Al Rajhi remains positive on Advanced Petrochemical's medium to long-term growth prospects
-0.19% 51.60 -0.10

Riyadh – Mubasher: Al Rajhi Capital has raised the target price (TP) of Advanced Petrochemical Company to SAR 58 per share on improved outlook.

The new TP is based on an expected increase in PP prices, dividends trajectory following the signed Murabaha facility, coupled with a decline in SAIBOR and organic growth, according to the research firm’s report on Monday.

Advanced Petrochemical has seen a good set of results during the second quarter (Q2) of 2020 with top-line and bottom-line coming at SAR 519 million and SAR 155 million, respectively, in-line with Al Rajhi’s estimates.

Going forward, despite the pandemic situation, the research company expects the utilisation rate to remain firm due to the company’s ability to shift towards higher netback markets depending on the market environment, along with likely improvement in PP demand due to the opening of economies.

Further, average PP prices, which remained under pressure since Q3-19, have started recovering, already up by 11% quarter-on-quarter (QoQ) this quarter. On the other hand, Propane prices are growing by around 3% in July.

As a result, the petrochemical company is not only likely to maintain its dividend at SAR 2.6 per share for 2020, but will also have a possibility to increase it further over the years.

Al Rajhi continues to remain positive on the company’s medium to long-term growth prospects, given the strong utilisation rates, consistent operating performance, FCF generation ability, healthy balance sheet, and excellent management quality.

“The key upside trigger might be attributed to sustained improved in spreads while further weakness in product spreads, a dividend cut, and/or any unplanned shutdown may act as the downside triggers,” the report concluded.