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 pays dividends on rare occasions. There have only been a few years with dividend payments in 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 moderate and on par with its peers. 

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.

The stock has been falling steadily in the past six months, losing 10% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 7ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 3ppts over the past six months and grew 1ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.

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 5.5% 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 6.8% 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 5.9%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.1 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. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, overpriced on P/FCF. 

Southern Province Cement Company

SAR 29.35

6

Southern Province Cement Company

SAR 29.35

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

SAR 29.35

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