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Asset manager Riyad Capital published its 1Q 2024 earnings forecast for Tadawul-listed companies in its coverage universe. The software and services sector leads the list of companies it expects to post the sharpest earnings growth in the first quarter of 2024 (+17% y-o-y), followed by the healthcare sector at 13%, and banking at 8%.
MEANWHILE- The petrochemicals leads those facing margin pressure, with earnings set to contract at seven of the eight companies Riyad covers. Cement sector earnings will fall 23% and telecoms 10% year-on-year in 1Q, the bank preducts.
BULLISH CALLS-
The research house expects tech earnings to grow 8% y-o-y in 2024, led by Solutions by stc’s 10% y-o-y rise in net income to SAR 333 mn. It’s penciling in a 15% rise in Solutions’ revenues to SAR 3 bn.
The healthcare sector is expected to post healthy results, despite Ramadan falling in March this year around and placing pressure on results, the report reads. Riyad sees healthcare companies in its coverage universe growing their inpatient and outpatient segments as they take advantage of new capacity. HMG’s net income is expected to rise 9% y-o-y in 1Q 2024 to SAR 535 mn, and revenues to increase 10% to SAR 2.5 bn.
Alinma’s net income is expected to rise 46% y-o-y to SAR 1.4 bn in 1Q 2024, followed by Albilad at 6%, ANB and Al Rajhi at 4% each, and Banque Saudi Fransi (BSF), and Saudi Awwal Bank (SAB) at 3% each, the report reads.
BEARISH CALLS-
Petrochems: Aramco’s price hikes of feedstocks, along with the rise in shipping prices due to tensions in the Red Sea are expected to weigh on the 1Q earnings results of the petrochemicals sector. “Petrochemical companies in The Kingdom will have to weather continued soft demand and potentially begin right-sizing,” according to the report. Riyad Capital is maintaining its “uncertain-to-negative outlook in the short term for 1H24.” Tasnee is expected to be in the red this quarter with its net income falling 217% y-o-y, and Saudi Kayan is expected to remain in the red with a net loss of SAR 919 mn.
REMEMBER: Petrochemicals giant Sabic said, earlier this year, it expects feedstock prices to surge by 1.7% of the company’s annual cost of sales on the back of Aramco’s hike in feedstock prices, with the impact materializing in the current quarter. Also Fertilizers maker Sabic Agri-Nutrients forecasted a 3.8% increase of the company’s annual cost of sales, while Yanbu National Petrochemical Co (Yansab) expected an increase averaging 2.8% of the company’s annual cost of sales.
Riyad is also bearish on the performance of the cement, and telecoms sectors. By contrast, Al Jazira Capital expects cement producers under its active coverage to see their net income rise almost 33% y-o-y in 1Q 2024.
