SIPCHEM Q2 First Take: Earnings better than expected on stronger-than-expected revenue and lower costs

Research evidence excerpt

SIPCHEM Q2 First Take: Earnings better than expected on stronger-than-expected revenue and lower costs

Alex Comer AC CEEMEA Equity Research

(44-20) 7134-5945 22 July 2026 J P M O R G A N

alex.r.comer@jpmorgan.com

Investment Thesis, Valuation and Risks

SIPCHEM (Neutral; Price Target: SRls18.20)

Investment Thesis

SIPCHEM is a largely fixed-cost petrochemical producer, based in Saudi Arabia.

SIPCHEM sells both chemicals and polymer products, with 70-80% of its sales volumes

coming from chemicals. Methanol is a key product for SIPCHEM, and we estimate that over

50% of its revenue comes directly or indirectly from methanol and methanol derivative

products. We do not believe the methanol market is fundamentally tight, and with limited

new capacity expected to come online outside of China, we should see the market gradually

tighten over time, but it may not be enough to achieve pricing power. Hence, unless we start

to see the closure of smaller coal-based methanol plants in China, it is unlikely that there will

be a significant uptick in methanol prices.

Valuation

Our DCF valuation of SIPCHEM gives us a Dec-27 target price of SAR 18.2/share and we

rate the stock Neutral. We use a CoC of 8.9% and a long-term growth assumption of 0%

Risks to Rating and Price Target

• Capacity additions/rationalization in China will impact supply/demand dynamics for

methanol

• Feedstock hikes/reductions in the KSA will impact profitability

• Significant improvement/continued weakness in the Chinese economy and property

sector will impact methanol demand

• Climate change targets and EU carbon border tax implementation will impact trade

flows

• Virgin plastic reduction and increased recycling mandates may impact longer-term

demand