Advanced Petrochemical Co.
Advanced Petrochemical Industries Sector APPC AB - 2330.SE July 12, 2016
Advanced Petrochemical Co. Recommendation Fair Value (SAR)
Overweight
Price as of July 10, 2016
57.25
72.74
Expected Return
11.1%
Tadawul Symbol
2330.SE
Company Data 52 Week High (SAR)
58.00
52 Week Low (SAR)
31.90
YTD Change
26.6%
3-Month Average Volume (Thousand Shares)
454
Market Cap. (SAR Million)
7,787
Market Cap. (USD Million)
2,076
Outstanding Shares (Million Shares)
164.0
Major Shareholders ( > 5% ) National Polypropylene Limited
2..5%
General Organization for Social Insurance
7..2%
52-week Stock Price Movement APPC
Petrochemical Sector
Tadawul Index
110
100
Q2 2016
Advanced Petrochemical Company (Advanced) posted a remarkable drop in bottom line in Q2 2016 hitting SAR 186 million, tumbling 23.5% from SAR 243.15 million in Q2 2015. However, net earnings surged 27.7% QoQ versus SAR 145.6 million in the first quarter. Over the first half, bottom line plunged 0.23% to SAR 332 million sliding from SAR 333 million in H1 2015. Gross profit (GP) came in at SAR 201 million in Q1 2016 slumping 23.8% YoY. Nonetheless, GP soared 27.7% QoQ driven by rising sales volume coupled with higher polypropylene prices compared to the previous quarter. Operating income (EBIT) hit SAR 192 million in Q2 2016 shifting down 23.5% YoY while surging 33% QoQ fueled by tumbling polypropylene prices compared to Q2 2015. Bottom line of Advanced registered SAR 186 million in Q2 2016 slipping 23.5% YoY compared to SAR 243.15 in Q2 2016 resulted from dropping average selling prices of polypropylene compared to the same quarter of 2015. However, polypropylene prices increased compared to the previous quarter of the current year and sales volume grew over the previous quarter. The second quarter’s net earnings missed our estimate of SAR 163 million analysts’ consensus of SAR 169.45 million. Our estimates of SAR 163 million were based on projected sales of 146 thousand tones in Q2 2016 where we believe the actual figure of SAR 186 million stemmed from 154 thousand tons. Furthermore, the results included an income from the investment in SK Advanced Limited in South Korea amounted to SAR 8 million as well as impairments of SAR 9 million created from dropping value of investments available for sale.
90 80 70
60 50
Source: Tadawul
Quarterly Net Income (SAR mn)
Advanced acquired a strategic stake in a Saudi listed company of SAR 387 million. The company did not disclose the firm’s name or stake percentage. We expect continuous growth in earnings due to improving polypropylene prices, hiking volume sales and a sustaining SAR 3 cash dividend per annum, thus we maintain our fair value at SAR 52.75 with “overweight” recommendation.
300
250 200
150 100 50
-
FY - Ending December
7117A
7115A
7117E
7112F
EV/EBITDA
4...
4..4
4...
4.77
EV/Sales
7.5.
...7
..5.
...7
Turki Fadaak Research & Advisory Manager [email protected]
P/E
11..2
11..7
11..4
11.17
Dividend Yield
%2.5
%2..
%7..
%7..
Mohammed Alghalbi Financial Analyst [email protected]
P/BV
..74
..11
7.42
7.72
P/Revenue
..22
1.71
7.22
..27
Revenue Growth
%..1
%71.2-
%4.1-
%..7
Source: Company Filings, Albilad Capital Research Estimates
Source: Company Filings, Albilad Capital Research Estimates
1
Advanced Petrochemical Industries Sector July 12, 2016 Income Statement (SAR mn)
APPC AB - 2330.SE 2013A
2014A
2015A
2016E
2017F
Sales
7,247
.,1.7
7,.22
2,185
7,75.
COGS
1,.72
7,172
1,.4.
1,715
1,7.7
SG&A
75
75
71
57
52
EBITDA
777
579
597
529
505
EBITA Margin
%74
%.1
%71
%77
%..
Depreciation and amortization
71.
71.
711
777
712
EBIT
955
739
773
700
552
Net interest income
15
1.
14
71
71
Others
7
7
)5(
72
57
Net Income
997
797
773
587
709
ROS
%71
%75
%.1
%.1
%.1
EPS
3470
7498
7439
7477
7430
Balance Sheet (SAR mn)
2013A
2014A
2015A
2016E
2017F
Cash and Marketable securities
577
447
45
.75
511
Receivables
777
1.4
777
771
774
Inventory
175
17.
177
171
17.
Others
12
7.
77
71
71
Total ST Assets
572
7,237
793
707
855
Net Fixed Assets
7,17.
7,121
7,12.
7,11.
7,157
Intangible Assets
52
14
5
5
5
Others
7.
74
77
77
77
Total LT Assets
2,297
2,957
3,733
3,332
3,325
Total Assets
3,223
3,828
3,885
7,035
7,228
Accounts Payable
.52
721
714
1.1
71.
Others
17.
57
75
75
.5
Total ST Liabilities
789
327
283
299
238
Total Long Term Debt
755
1,144
1,174
1,114
..4
Other Non-Current Liabilities
74
.7
77
54
2.
Equity
2,297
2,377
2,905
2,777
2,578
Total Liabilities and Equity
3,223
3,828
3,885
7,035
7,228
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.
2
Advanced Petrochemical Industries Sector July 12, 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.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research
Brokerage E-mail: Tel:
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
3
Advanced Petrochemical Co. Recommendation Fair Value (SAR)
Overweight
Price as of July 10, 2016
57.25
72.74
Expected Return
11.1%
Tadawul Symbol
2330.SE
Company Data 52 Week High (SAR)
58.00
52 Week Low (SAR)
31.90
YTD Change
26.6%
3-Month Average Volume (Thousand Shares)
454
Market Cap. (SAR Million)
7,787
Market Cap. (USD Million)
2,076
Outstanding Shares (Million Shares)
164.0
Major Shareholders ( > 5% ) National Polypropylene Limited
2..5%
General Organization for Social Insurance
7..2%
52-week Stock Price Movement APPC
Petrochemical Sector
Tadawul Index
110
100
Q2 2016
Advanced Petrochemical Company (Advanced) posted a remarkable drop in bottom line in Q2 2016 hitting SAR 186 million, tumbling 23.5% from SAR 243.15 million in Q2 2015. However, net earnings surged 27.7% QoQ versus SAR 145.6 million in the first quarter. Over the first half, bottom line plunged 0.23% to SAR 332 million sliding from SAR 333 million in H1 2015. Gross profit (GP) came in at SAR 201 million in Q1 2016 slumping 23.8% YoY. Nonetheless, GP soared 27.7% QoQ driven by rising sales volume coupled with higher polypropylene prices compared to the previous quarter. Operating income (EBIT) hit SAR 192 million in Q2 2016 shifting down 23.5% YoY while surging 33% QoQ fueled by tumbling polypropylene prices compared to Q2 2015. Bottom line of Advanced registered SAR 186 million in Q2 2016 slipping 23.5% YoY compared to SAR 243.15 in Q2 2016 resulted from dropping average selling prices of polypropylene compared to the same quarter of 2015. However, polypropylene prices increased compared to the previous quarter of the current year and sales volume grew over the previous quarter. The second quarter’s net earnings missed our estimate of SAR 163 million analysts’ consensus of SAR 169.45 million. Our estimates of SAR 163 million were based on projected sales of 146 thousand tones in Q2 2016 where we believe the actual figure of SAR 186 million stemmed from 154 thousand tons. Furthermore, the results included an income from the investment in SK Advanced Limited in South Korea amounted to SAR 8 million as well as impairments of SAR 9 million created from dropping value of investments available for sale.
90 80 70
60 50
Source: Tadawul
Quarterly Net Income (SAR mn)
Advanced acquired a strategic stake in a Saudi listed company of SAR 387 million. The company did not disclose the firm’s name or stake percentage. We expect continuous growth in earnings due to improving polypropylene prices, hiking volume sales and a sustaining SAR 3 cash dividend per annum, thus we maintain our fair value at SAR 52.75 with “overweight” recommendation.
300
250 200
150 100 50
-
FY - Ending December
7117A
7115A
7117E
7112F
EV/EBITDA
4...
4..4
4...
4.77
EV/Sales
7.5.
...7
..5.
...7
Turki Fadaak Research & Advisory Manager [email protected]
P/E
11..2
11..7
11..4
11.17
Dividend Yield
%2.5
%2..
%7..
%7..
Mohammed Alghalbi Financial Analyst [email protected]
P/BV
..74
..11
7.42
7.72
P/Revenue
..22
1.71
7.22
..27
Revenue Growth
%..1
%71.2-
%4.1-
%..7
Source: Company Filings, Albilad Capital Research Estimates
Source: Company Filings, Albilad Capital Research Estimates
1
Advanced Petrochemical Industries Sector July 12, 2016 Income Statement (SAR mn)
APPC AB - 2330.SE 2013A
2014A
2015A
2016E
2017F
Sales
7,247
.,1.7
7,.22
2,185
7,75.
COGS
1,.72
7,172
1,.4.
1,715
1,7.7
SG&A
75
75
71
57
52
EBITDA
777
579
597
529
505
EBITA Margin
%74
%.1
%71
%77
%..
Depreciation and amortization
71.
71.
711
777
712
EBIT
955
739
773
700
552
Net interest income
15
1.
14
71
71
Others
7
7
)5(
72
57
Net Income
997
797
773
587
709
ROS
%71
%75
%.1
%.1
%.1
EPS
3470
7498
7439
7477
7430
Balance Sheet (SAR mn)
2013A
2014A
2015A
2016E
2017F
Cash and Marketable securities
577
447
45
.75
511
Receivables
777
1.4
777
771
774
Inventory
175
17.
177
171
17.
Others
12
7.
77
71
71
Total ST Assets
572
7,237
793
707
855
Net Fixed Assets
7,17.
7,121
7,12.
7,11.
7,157
Intangible Assets
52
14
5
5
5
Others
7.
74
77
77
77
Total LT Assets
2,297
2,957
3,733
3,332
3,325
Total Assets
3,223
3,828
3,885
7,035
7,228
Accounts Payable
.52
721
714
1.1
71.
Others
17.
57
75
75
.5
Total ST Liabilities
789
327
283
299
238
Total Long Term Debt
755
1,144
1,174
1,114
..4
Other Non-Current Liabilities
74
.7
77
54
2.
Equity
2,297
2,377
2,905
2,777
2,578
Total Liabilities and Equity
3,223
3,828
3,885
7,035
7,228
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.
2
Advanced Petrochemical Industries Sector July 12, 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.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research
Brokerage E-mail: Tel:
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
3
