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Al Jazira Capital sees a strong performance by banks compensating for falling profitability at telecoms companies as petrochemical players in its coverage universe start to return to profitability.
Al Jazira expects a 5.2% y-o-y rise in the combined net income of the 51 companies it has under active coverage. The uptick to a combined SAR 16.3 bn will be led by 11.8% growth in bank earnings, while cement producers will see their net income rise almost 33%. Healthcare providers will far well thanks to growth in admissions and better pricing power, while tourism and transportation players are benefiting from rising tourism and air traffic activity. Fintech and media companies should also report growing bottom lines.
Under pressure: Al Jazira sees petchem players starting to return to profitability after racking up losses in 4Q, while telecoms will see their bottom lines dip a combined 12% year-on-year.
REMEMBER- Q1 results for the petrochemicals sector are the first since Aramco hiked feedstock prices earlier this year. While most Tadawul-listed firms said they expect the price hike to hit their cost of production in 1Q 2024, Al Jazira Capital doesn’t forecast the impact of the hike in prices to fully materialize this quarter.
Red Sea crisis to bite: Al Jazira Capital said it expects the ongoing Red Sea crisis to take a toll on the petrochemicals industry due to shipment delays (cutting into revenues) and a rise in shipments costs (eating into margins).
BANKS-
Al Rajhi Bank, Alinma Bank, and Bank Al Bilad are expected to see their combined net income grow by 11.8% y-o-y in 1Q 2024 on the back of an increase in net interest margin and growth in financial positions, Al Jazira Capital said.
Al Rajhi Bank — the largest Islamic bank globally — will turn in a 5.7% y-o-y rise in net income to SAR 4.4 bn, while Alinma Bank’s net income is set to grow by 38.9% yo SAR 1.3 bn. It expects Al Bilad Bank’s net income to rise by 10% y-o-y to SAR 616 mn.
The three will see combined loan growth of 6.3% y-o-y in the period, with Alinma Bank leading the pack with a projected growth of 16% y-o-y. It sees combined deposits up 7.7% y-o-y during the period, led by 20.2% growth in deposits by Alinma Bank.
PETROCHEMICALS-
Nearly all petrochemical manufacturers that Al Jazira Capital covers are set for a drop in net income on an annual basis in the first quarter of the year despite a return to profitability when compared with the last quarter of 2023. Those include petrochemicals giant Sabic which is set to see net income down by 35.4% y-o-y in 1Q to SAR 424 mn. It sees Sabic Agri-Nutrients’ net income down by 9.7% y-oy during the period to SAR 885 mn, with Sipchem’s net income plunging by 67.8% y-o-y to SAR 151.3 mn.
