Earnings Report /
Saudi Arabia

Yansab: Highest earnings since Q3 18 despite shutdowns

  • Revenues increased 44.2% yoy and 25.0% qoq to SAR1.72bn and were higher than our estimates of SAR1.59bn

  • Gross profit increased by 167% yoy to SAR532mn in Q1 21 and is significantly higher than our estimates of SAR390mn

  • Prices in Q1 21 were strongly driven by improved demand from China, supply disruptions and higher oil prices

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
19 April 2021
Published bySNB Capital

Yansab reported a better-than-expected set of Q1 21 results, with a net income of SAR420mn, up 302% yoy and 26.3% qoq. This is the highest quarterly earnings since Q3 18 and is significantly higher than the NCBC and consensus estimates of SAR285 and SAR276mn, respectively. We believe the higher than expected results are due to better realized prices, higher operating rates and/or the usage of inventory, which offset the impact of the 10-21 days shutdown and an impairment cost of SAR64mn.

Revenues increased 44.2% yoy and 25.0% qoq to SAR1.72bn and were higher than our estimates of SAR1.59bn

This is the highest quarterly revenue since Q3 18. We believe the strong growth is due to higher realized prices, improved operating rates and/or the usage of inventory, which offset the impact of the 21 day shutdown at its MEG plant and the 10 day closure of the olefins facility. Based on our estimates, we believe operating rates stood at 88%, higher than our estimates of 84% and Q4 20 levels of 91%.

Gross profit increased by 167% yoy to SAR532mn in Q1 21

This is significantly higher than our estimates of SAR390mn. Gross margins stood at 30.8%, higher than our estimates of 24.5% and 34.5% in Q4 20.

EBIT stood at SAR414mn, up 304% yoy and significantly higher than our estimates of SAR294mn

We highlight that the company recorded an impairment charge of SAR64mn against capital work in progress. Adjusting for the one-off, net income would be SAR484mn.

Prices in Q1 21 were strongly driven by improved demand from China, supply disruptions and higher oil prices

HDPE increased 28.9% yoy (10.4% qoq) to US$1,073, while PP increased 30.0% yoy (12.9% qoq) to US$1,179. MEG prices were up 23.7% yoy (33.7% qoq) to US$658. PP-propane spread expanded 59.5% yoy (-1.6% qoq) to US$644.

Based on our last update published in June 2020, we are Neutral on Yansab with a PT of SAR48.6

Since then, the stock recorded a strong rally of 43.1%. We await the full financials to update our PT and estimates. The strong results despite the shutdown and the one-off are the key highlights of the results. As a read across, it also indicates a strong earnings season for other petrochemical companies.