SABIC is a leading global petrochemical player, with a broad
product range, integrated production flow and low cost feedstock advantage.
NCB Capital’s analysis includes the following highlights:
*NCB Capital believes SABIC has one of the region’s most
diversified and strongest product ranges including petrochemicals, fertilizers
and metals. Moreover, with its integrated production flow, feedstock cost
advantage and wide production base, SABIC is able to post globally leading
margins. NCB Capital forecasts SABIC’s overall gross margins at 33.7 percent in
2011 versus 25 percent for global peers.
*Despite the fragility of the global economic recovery,
petrochemical demand is growing at a steady pace, led by emerging markets,
especially China. With its wide product portfolio and strong presence across
geographies, SABIC remains a key beneficiary of this growth. Approximately 50
percent of SABIC’s sales is to emerging markets with 30-40 percent to China
alone.
*In 2010, SABIC started operations at Yansab and Sharq’s third
expansion project, both in Saudi Arabia, and its petrochemical complex in
Tianjin, China, through a JV with Sinopec. These complexes added 8.5 million
mtpa to SABIC’s existing base of 61 million mtpa of petrochemical products. The
timing of these projects seems ideal as petrochemical demand started picking up
during 2010. Commencement of the Saudi Kayan complex in 2011 will add
performance chemicals to SABIC’s product mix. NCB Capital expects SABIC’s total
petrochemical capacity to increase to 77 million mtpa by 2014.
*NCB Capital initiated coverage on SABIC with an Overweight
rating and a price target of SR130.8 per share. SABIC’s strong margin outlook
and expanding production base should lead to net income growing 34 percent in
2011 to SR28.6 billion. The stock trades on 2011 P/E and EV/EBITDA multiples of
11.2x and 6.8x, respectively.
NCB Capital was voted best research house in three
categories in Euromoney’s annual Middle East research survey for 2010. The bank
achieved a total of 10 ranked positions in the 2010 survey, the third highest
among all research firms in the region. On the basis of top ranked positions,
the firm achieved the second highest total in the region.
NCB Capital was awarded Best Research House in the Cement
Sector, Best Research House in the Consumer Goods/Retail Sector and Best
Research House in the Food and Agriculture Sector.
Additionally, it was ranked second in oil and natural gas,
economics and credit. It also won
third place in strategy and fourth in general industries.
The bank, which provides analysis on the agriculture and
food, cement, construction, industrials, petrochemical, consumer goods/retail
and utilities sectors, claims it is the only domestically-owned investment bank
to offer such a range.
