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QNBK 135 62,706
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ALINMA 16.47 22,194,374

Yanbu Cement

Source: NCB Capital

Fundamentals a drag

We remain Neutral on the stock as we continue to be cautious on the fundamental outlook for Yanbu Cement. It continues to suffer from its old lines and the slow pace of demand momentum in the Western region. This has been reflected in the share price with the stock underperforming the sector by 12% YTD. The key catalyst remains the opening of its new line in mid 2011.

• Another weak performance expected in 2Q10: 2Q10 is expected to be another relatively weak quarter from Yanbu Cement as its old lines and the lack of demand momentum in the western region continue to pressure profitability. We expect revenues to fall by 10% to SR248mn in 2Q10 with net income falling by 14% to SR130mn. For April and May, total sales are down 9.4% YoY, against up 17.6% for the sector.

• Poor outlook, but reflected in stock performance, maintain Neutral rating: Yamama had a torrid 1Q10, but this has been reflected in its stock performance where YTD, it has underperformed the sector by 12% and the TASI by 15%. It trades at 10.1x 2010 P/E, with a 6% discount to peers. We maintain our Neutral rating.

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