Download Advanced Petrochemical Co.

Advanced
Petrochemical Industries Sector
APPC AB - 2330.SE
October 5, 2016
Advanced Petrochemical Co.
Recommendation
Fair Value (SAR)
Overweight
Price as of July 10, 2016
68.44
5:.93
Expected Return
%3:.:
Tadawul Symbol
2330.SE
Company Data
52 Week High (SAR)
44.20
52 Week Low (SAR)
26.60
YTD Change
23.05%
3-Month Average Volume (Thousand Shares)
482
Market Cap. (SAR Million)
7,612
Market Cap. (USD Million)
2,030
Outstanding Shares (Million Shares)
196.7
National Polypropylene Limited
9.;7%
General Organization for Social Insurance
8.59%
Major Shareholders ( > 5% )
52-week Stock Price Movement
APPC
Petrochemical Sector
Tadawul Index
Q3 2016
Advanced Petrochemical Company posted a remarkable drop in its bottom line in
Q3 2016 hitting SAR 188 million, tumbling 19.7% from SAR 234 million in Q3
2015. However, net earnings grew 0.76% QoQ. Over the nine months, bottom
line plunged 8.1% to SAR 521 million sliding from SAR 567 million in the same
period last year.
Gross profit (GP) came in at SAR 202 million in Q3 2016 slumping 18.6% YoY
due to lower selling prices. Nonetheless, GP soared 0.36% QoQ driven by the
decrease in feedstock prices.
Operating income (EBIT) hit SAR 193 million in Q3 2016 shifting down 19.7%
YoY while surging 0.75% QoQ.
The average propane price fell 24% in Q3 2016 YoY and 9% QoQ, while polypropylene prices declined 6.5% YoY and increased 2.2% QoQ. Thus, the polypropylene - propane price spread in Q3 2016 stood at USD 700, which is the
reason of the gross margin improvement.
The third quarter’s net earnings missed our estimate of SAR 218 million and analysts’ consensus of SAR 203 million.
Our estimates of SAR 218 million were based on projected sales of 150 thousand
tones in Q3 2016 where we believe the actual figure of SAR 188 million
stemmed from 140 thousand tons. Furthermore, the results included an income
from the investment in SK Advanced Limited in South Korea which amounted to
SAR 14.3 million declining 5.9% from our estimate of SAR 15.2 million. In addition, the bottom line included an impairment charge of SAR 14 million for available for sale investments.
130
120
110
100
90
80
70
60
Source: Tadawul
Quarterly Net Income (SAR mn)
300
We expect growth in earnings in Q4 2016 compared to the third quarter due to
polypropylene prices stabilization, hiking volume sales and the expansion in polypropylene - propane price spread. We believe that the company is able to continue pay cash dividends at SAR 2.5 per annum, and our fair value for Advanced
Petrochemical Company is SAR 46 with “overweight” recommendation.
200
100
FY - Ending December
-
Source: Company Filings, Albilad Capital Research Estimates
Turki Fadaak
Research & Advisory Manager
[email protected]
Mohammed Alghalbi
Financial Analyst
[email protected]
4436A
4437A
4438E
4439F
EV/EBITDA
:.37
:.44
:.44
9.:6
EV/Sales
4.75
5.4;
5.75
5.49
P/E
34.36
34.8:
34.97
34.58
Dividend Yield
%8.7
%8.7
%8.7
%8.7
P/BV
5.44
5.45
4.9;
4.7:
P/Revenue
5.99
3.84
4.;5
6.46
Revenue Growth
%;.4
%43.9-
%34.7-
%6.9
Source: Company Filings, Albilad Capital Research Estimates
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Advanced
Petrochemical Industries Sector
October 5, 2016
Income Statement (SAR mn)
APPC AB - 2330.SE
2013A
2014A
2015A
2016E
2017F
Sales
4,9:8
5,458
4,599
2,126
4,448
COGS
3,;89
4,469
3,5:5
3,355
3,464
SG&A
67
67
63
76
79
EBITDA
774
945
954
949
929
EBITA Margin
%4:
%53
%64
%66
%64
Depreciation and amortization
44;
44;
433
446
439
EBIT
566
735
743
715
712
Net interest income
37
35
3:
44
44
Others
8
4
)7(
56
87
Net Income
557
751
713
798
735
ROS
%44
%47
%54
%55
%55
EPS
2883
3882
3862
3869
3873
Balance Sheet (SAR mn)
2013A
2014A
2015A
2016E
2017F
Cash and Marketable securities
766
::6
:7
569
763
Receivables
488
3;:
444
456
467
Inventory
367
345
346
335
346
Others
39
4;
44
44
43
Total ST Assets
972
1,234
453
714
931
Net Fixed Assets
4,385
4,394
4,39;
4,347
4,468
Intangible Assets
79
3:
7
7
7
Others
4;
4:
48
48
48
Total LT Assets
2,251
2,594
3,433
3,328
3,323
Total Assets
3,223
3,828
3,886
4,942
4,254
Accounts Payable
579
493
43:
39:
3;7
Others
34;
78
87
87
57
Total ST Liabilities
485
327
283
244
23 1
Total Long Term Debt
677
3,4::
3,46:
3,44:
;;:
Other Non-Current Liabilities
4:
58
68
7:
95
Equity
2,254
2,377
2,599
2,732
2,952
Total Liabilities and Equity
3,223
3,828
3,886
4,942
4,254
Source: Company Filings, Albilad Capital Research Estimates
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
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Advanced
Petrochemical Industries Sector
October 5, 2016
APPC AB - 2330.SE
Albilad Capital Rating Methodology
Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover,
the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set
and the possibility of ascent/descent.
Overweight:
The Target share price exceeds the current share price by ≥ 10%.
Neutral:
The Target share price is either more or less than the current share price by < 10%.
Underweight:
The Target share price is less than the current share price by ≥ 10%.
To be Revised:
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting
for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research.
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