AlJazira Cap says City Cement Q4 2020 profit in-line with estimates, sets TP at SAR 24.8

City Cement Co.’s Q4 2020 net income of SAR 62.7 million came in-line with AlJazira Capital’s estimate of SAR 58.5 million.

The year-on-year (YoY) decline is attributed to a 14.9% fall in selling price per ton despite dispatches rising by 13.3% YoY on higher local demand.

Selling prices are likely to remain low for the coming two quarters due to adjustment in prices resulting from value-added tax (VAT).

“The producers, instead of passing on the VAT, seem to be absorbing the impact. This can create an opportunity for long-term investors as high demand for cement will eventually push selling prices,” the brokerage said.

The cement sector will show a short-term decline in net income due to selling price discount, AlJazira Capital said, but is optimistic on the industry for the long term with the increase in mortgage loans and the future demand from megaprojects.

City Cement is expected to report a net profit of SAR 214.3 million for 2021, at SAR 1.53 per share, a decrease of 2.8% YoY.

AlJazira Capital maintained its “Neutral” recommendation on the stock, setting the target price at SAR 24.80 per share.