The average target price of 3050.SR is 33 and suggests 6% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 43.0. This translates into 38% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 27.0. This is equivalent to 13% downside potential in the worst case. 

Southern Province Cement Company engages in the production and sale of cement, clinker, and its derivatives in Saudi Arabia. The company was founded in 1978 and is headquartered in Abha, Saudi Arabia.

Saudi Arabia

Southern Province Cement Company

Basic Materials

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. On average, the company pays dividends twice a year. 

3050.SR reported revenue of SAR 935mn in the last 12 months, down 13% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 24% from FY23 to SAR 1.73. Market expects EPS to reach SAR 1.39 in FY25.

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 1ppts and its growth decelerated by 5ppts 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 3ppts and accelerated its growth by 3ppts 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 strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 50.0% in the last 12 months, up from 36.6% in FY23. 

Historically, 3050.SR has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 26.1%, a growth from 18.3% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 5.7% in the last 12 months, an increase from 4.9% in FY23. The market analysts predict that RoA will be 5.6% in FY24, again stronger than its peers. 

Southern Province Cement Company reported a return on equity (RoE) of 7.3% in the last 12 months, up from 6.0% in FY23. The market consensus projects an RoE of 6.9% in FY24, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 6.2%, below the peers. The consensus estimate for FY24 for RoCE is 6.0%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.2 in the past several years. This ratio implies a average 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.

3050.SR has average 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 quite stable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, 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, excessive margin volatility, and poor working capital management.

In highly turbulent market conditions, 3050.SR is not volatile. In other words, the stock will fall far 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 very low. 

In normal market circumstances, 3050.SR is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, overvalued on P/FCF. 

Southern Province Cement Company

SAR 31.2

6

Southern Province Cement Company

SAR 31.2

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

SAR 31.2

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