Basic Chemical Industries Company manufactures and sells chemicals primarily in the Kingdom of Saudi Arabia. It operates through two segments, Chemicals and Adhesives and Other Materials. The company offers hydrochloric acid, caustic soda, chlorine gas, sodium hypochlorite, polyurethane chemicals, etc.; and ferric chloride, hot and colt melt adhesives, sulfuric acid, etc. for various applications. It purchases, formulates, processes, exports, imports, markets, distributes, and acts as an agent for the sale of chemicals. The company was founded in 1973 and is headquartered in Dammam, the Kingdom of Saudi Arabia.

Saudi Arabia

Basic Chemical Industries Company

Basic Materials

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been strong and significantly above its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. 

1210.SR reported revenue of SAR 737mn in the last 12 months, down 2% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 28% from FY24 to SAR 0.68.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 23ppts and its growth decelerated by 4ppts in the past month. There is a distinction between the stock's performance and that of its peers from the same country and industry. Over six months it exceeded the performance of this peer group by 1ppts and accelerated its growth by 1ppts in the recent month. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 12.0% in the last 12 months, a decline from 18.0% in FY23. 

Historically, 1210.SR has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 2.6%, a growth from 2.0% in FY23. 

Basic Chemical Industries Company reported a return on equity (RoE) of 3.2% in the last 12 months, up from 2.5% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 1.8%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to 1.5% in the last 12 months, an increase from 1.2% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.8 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

1210.SR has poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity is usually stable and is somewhat unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note adequate interest coverage and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, negligible return on capital, and poor working capital management.

In highly turbulent market conditions, 1210.SR is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, 1210.SR is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Considering past and projected metrics, the stock is 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, of fair value on EV/EBITDA, overvalued on P/FCF. 

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Basic Chemical Industries Company

SAR 26.48

3

Basic Chemical Industries Company

SAR 26.48

3

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SAR 26.48

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