Materials

Report by AlphaMena

After a larger-than-expected Q4 loss, AlphaMena significantly lowers their earnings estimates for 2025 and 2026, revising their EPS forecasts to SAR 0.78 and SAR 1.67, respectively. While SABIC boasts a healthy balance sheet and has maintained its FCF at a high level, even in difficult times, AlphaMena expects pressure to persist on the chemicals industry with weak demand and high input costs, leading to lower prices and squeezed margins. So, overcapacity will continue to be a challenge, especially for polymers. Given the near-term challenges facing the company, they are waiting for a further pullback in the share price (up to 10%) to provide a more attractive entry point.

Materials

Report by Alembic Global Advisors

Relatively weak MENA chemical sector share price performance has resulted from a compression in margins on the back of relatively weak product pricing and higher feedstock costs coupled with investor skittishness around the prospects of a recession across several geographies. Hassan Ahmed’s analysis suggests Street expectations for 3Q23 are too high and has lowered his 2023 and 2024 earnings estimates for all seven MENA names that he covers. SABIC is his top pick, as Hassan believes it offers the best blend of earnings resilience and below-sector average valuation.