Saudi Basic Industries Co "FY26 impacted; earnings recovery thereafter"

Research evidence excerpt

Saudi Basic Industries Co "FY26 impacted; earnings recovery thereafter"

Forecast returns

Forecast price appreciation 0.0%

Forecast dividend yield 4.9%

Forecast stock return 4.9%

Market return assumption 9.8%

Forecast excess return -4.8%

Company Description

SABIC is engaged in the manufacturing and distribution of petrochemicals and agri-nutrients

in global markets. The Petrochemicals segment includes chemicals, polymers and plastic

products while the Agri-Nutrients segment comprises fertiliser products. Saudi Aramco

recently completed its share acquisition of a 70% stake in SABIC.

Valuation Method and Risk Statement

We value the group using the Discounted Cash Flow method.

Risks include:

1. Highly competitive industry SABIC is exposed to competitive characteristics across different

geographic markets and industries, which creates operational and market risks. SABIC faces

potential failure to develop new products economically or bring them to market effectively,

and risks falling behind competitors in technology advancements.

2. Cyclical nature of petrochemicals, which is exposed to cycles of expansion and contraction

aligned with global economic movements. This creates supply and demand fluctuations

causing price volatility in feedstock and finished products, with historical impacts from

economic slowdowns affecting downstream demand.

3. Environmental challenges, which poses both physical risks (extreme weather, rising sea

levels, temperature changes) and transition risks associated with the shift to a low-carbon

economy. SABIC faces challenges in executing their GHG emissions reduction roadmaps.

4. Evolving ESG regulations - increasing regulatory burdens related to sustainability and

ESG reporting create compliance challenges.