KSA Q2 equities: Petrochems, cement and healthcare the standout sectors

The outlook for Saudi equities in the second quarter (Q2) of 2021 is expected to be “mostly positive,” with the petrochemicals, cement and healthcare sectors forecast to be the best performers, while food retailers, telecoms and insurance companies are likely to report modest growth, according to a report this week.

The quarterly report by Riyadh financial services company Al

Rajhi Capital said their positive outlook was “driven by improving macroeconomic conditions with a gradual uptick in local spending across most segments, and further supported by increased oil prices.”

The petrochemical sector is expected to be one of the standout Q2 sectors, aided by higher product prices and sales volume.

Saudi petrochemical producers listed on the Tadawul stock exchange reported net profits of

SR8.5 billion ($2.27 billion) in Q1, a 368.1 percent rebound from the SR3.2 billion losses over the same period in 2020, according to data from the financial information website Argaam.

SABIC, which accounts for 57 percent of total earnings in the sector, in April reported that its Q1 profits had more than doubled to SR4.86 billion, compared to the previous quarter.

The Riyadh-headquartered company rebounded from a loss of

SR1.05 billion in the same quarter last year and, similar to the wider sector, the upsurge resulted from a hike in average sales prices of 22 percent compared to Q4 2020.

With oil prices rising for the fourth consecutive quarter, the Al Rajhi Capital report expects the petrochem sector’s positive growth to continue into Q2.

As the Kingdom recovers from the impact of the coronavirus disease (COVID-19) pandemic, the healthcare sector is expected to see improved financials, as patients return to hospitals for treatment.

“Overall, we expect revenue of healthcare companies under our coverage to grow by 41 percent year-on-year, while net profit is expected to grow by 66 percent year-on-year, reflecting growth in revenue and improvement in operating efficiency,” the report said.

The cement sector is set to enjoy a positive Q2, as construction increases on the back of the Kingdom’s bid to increase homeownership levels among Saudi citizens. Argaam reported that total sales of 17 Saudi cement producers rose by 65 percent year-on-year in May.

On the flip side, the retail sector is likely to still see a tough quarter, as the economic impact of the pandemic, coupled with expats leaving the country, continue to dent sales, especially in the grocery sector.