Earnings Report /
Saudi Arabia

Yansab: Highest quarterly net income on record

  • Revenues increased 4.0% yoy (+4.6% qoq) to SAR2.06bn and was higher than our estimates of SAR1.97bn

  • Gross profit came in at SAR400mn down 48.2% yoy (-6.8% qoq) but was higher than our estimates of SAR349mn

  • EBIT stood at SAR277mn, down 56.7% yoy (-6.5% qoq) higher than our estimates of SAR224mn

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
26 July 2022
Published bySNB Capital

Yansab reported a better-than-expected set of Q2 22 results, with a net income of SAR289mn down 51.6% yoy (+1.9% qoq). This is higher than the SNB Capital, and consensus estimates of SAR221mn and SAR252mn, respectively. We believe, the variance is attributed to 1) higher than expected revenues, 2) stronger than expected gross margin and 3) higher than expected net non-operating income.

  • Revenues increased 4.0% yoy (+4.6% qoq) to SAR2.06bn and was higher than our estimates of SAR1.97bn. This marked the highest quarterly sales since Q3 18. In Q2 22, sales volumes were up 4% yoy (flat qoq) while average product prices were down 1% yoy (5% qoq). Based on our calculations, we believe Yansab’s operating rates stood at 94%, in line with our estimates and Q1 22 levels of 94% each. We highlight that Yansab’s ability to realize better product prices qoq is a key positive.

  • Gross profit came in at SAR400mn down 48.2% yoy (-6.8% qoq) but was higher than our estimates of SAR349mn. Gross margin stood at 19.4%, higher than our estimates of 17.8%, compared to 21.8% in Q1 22 and contracting considerably from 38.9% in Q2 21. We believe the decrease in gross margin is due to the impact of higher average input costs.

  • EBIT stood at SAR277mn, down 56.7% yoy (-6.5% qoq) higher than our estimates of SAR224mn. Opex came in at SAR123mn, in-line with our estimates of SAR125mn and lower than Q1 22 expense of SAR133mn. Opex to sales stood at 6.0% compared to 6.7% in Q1 22 and our estimates of 6.3%.

  • In Q2 22, EBITDA came in SAR610mn (+1% qoq) while FCF decreased to SAR329mn (-11% qoq).

  • In Q2 22, HDPE prices increased 3.7% yoy (+0.4% qoq) to US$1,195, while PP prices decreased 2.8%yoy (-2.0% qoq) to US$1,171. MEG prices decreased 6.5% yoy (-10.0% qoq) to US$676. PP-propane spread decreased 57.2% yoy (-35.1% qoq) to US$276.

Outlook

Based on our June 2022 update, we are Overweight on Yansab with a PT of SAR66.3. Despite the muted outlook for the sector, we believe Yansab’s key strengths include a debt free balance sheet, which we believe will provide Yansab with a competitive advantage in the current high interest rate scenario; high cash levels and an attractive dividend yield of 6.2%. Yansab is trading at 2022 P/E of 20.8x vs its local peer group average of 17.0x.