Saudi International Petrochemical -Equity Report -24-06-2012

Lower 1Q12 results because of rising cost and falling product prices
During 1Q12, SIPCHEM reported net income of SAR151.6mn compared to SAR211mn in the previous quarter. Drop in the income was a combination of both the fall in revenue (which was because of fall in product prices) and rise in cost (acquisition of Aectra SA). Increase in the results of first quarter compared to the same period last year was due to the increase in production and sales volume and improvements in sales prices. Nevertheless, the profit margins continue to remain depressed on both YoY and QoQ basis.

Valuation Update
We have raised our fair value to SAR25.5/share as compared to SAR23.6/share earlier. Change in the fair value is because of incorporation of the SIPCHEM III. The stock at its current price of SAR18.15 is trading at a discount of 40.5% to our fair value. Hence we maintain our recommendation at Strong Buy on the stock.