2011 revenues grazed the SR20 billion-mark witnessing a 23 percent rise to SR19.6 billion, led by a 27 percent growth in the Industrial segment. Riyad Capital has modeled 2012 revenues at SR20.9 billion in 2012 (6.3 percent) and 2013 revenues at SR22.1 billion (+6.3 percent).

Lower Petrochemical margins in Q4, 2011 pulled down 2011 segment gross margins by 1.5 percent to 23.8 percent. On the other hand, titanium dioxide rocketed industrial segment margins from 24.5 percent in 2010 to 40.2 percent in 2011, sequentially highest leading to 7.4 percent increase in total gross margins to 35.8 percent. Similarly, net margins expanded 3.2 percent in 2011 to 12.4 percent. Riyad Capital expects a moderation of overall gross margins in 2012 to 35.0 percent from 35.8 percent in 2011 as TiO2 prices continue to rise but petchems remain volatile.

Tasnee witnessed foreign exchange translation loss as it consolidated its industrial segment account on the back of a 4 percent drop in euro and –15 percent decline in the Indian rupee versus the US dollar in 2011. Further, a SR150 million (SR0.27/share) charge was taken for disassembling and reinstalling of some Cristal production units.

Riyad Capital 2012 and 2013 net income forecasts of SR2.7 billion (EPS SR4.86) and SR3.0 billion (EPS SR5.44) represent 11 percent and 12 percent increase respectively. Two consecutive bonus issues of 10 percent and 20 percent in 2010 and 2011 are an icing over the SR1.00 and SR1.50 cash payouts. Trading at 8.4x 2012 earnings, the bank continues with its BUY recommendation but with slightly lower target price of SR46 per share.

The Riyad Capital report said growth in the industrial segment outpaced petrochemicals as total revenues recorded 23 percent growth to SR19.6 billion in 2011. Revenue growth over the past four years has been erratic ranging from 8 percent to 47 percent due largely to sector downturn in 2009. Twenty-seven percent increase in industrial segment revenues was led by an estimated 40 percent growth in titanium dioxide prices during the year. Petrochemicals were also not to be left behind and marched on registering 20 percent growth in 2011. The industrial segment comprised 53 percent of total revenues. However, petrochemicals have grown at a much higher CAGR of 53 percent since 2008 versus its sister business.