Saudi Arabia: Earnings Estimates Q1 2018

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1. April 3 , 2018 Earnings Estimates Q1 2018 Banks Summary The report shows our first quarter 2018 earnings estimates for companies under coverage. We believe the banking sector is expected to witness an increase in the profit in general, due to improvement in the sector's profitability margins. According to our analysis, total deposits are expected to grow slightly 0.4% YoY and sliding 0.5% QoQ. Loans portfolio are expected to shrink 1.2% YoY while stable compared to the previous year. Petrochemicals Arab light oil price averaged USD 66 during the first quarter of 2018, pushing prices of most petrochemical products in Q1 2018. However, some feedstock declined. On the other hand, fertilizer prices have improved compared to the previous quarter and the corresponding quarter as shown in the table below. Cement Cement demand intensifies dramatically in the first quarter fueled by favorable weather conditions and the lack of religious events or prolonged holidays, however cement sales reached 7.7 million tons in January and February sliding by 13.7% YoY due to lower demand compared to 2017. Thus, we expect cement sales to fall below 12 million tons in Q1 2018 displaying a decrease of 13%. Meanwhile, clinker inventory reached the highest level recording 35.6 million tons by the end of February 2018, slightly higher than their level at the end of 2017. Retail We believe that the introduction of value added tax starting in January has contributed to the increase in the demand for many products during the last quarter 2017 at the expense of Q1 2018. However, the sector is highly heterogeneous in general. Agriculture and Food sector A general slowdown in demand in the sector is expected. In terms of supply, these companies rely heavily on expatriate labor and therefore they will be negatively affected by the increase in labor fees. HealthCare The first quarter is expected to witness high revenues for healthcare companies driven by higher demand for medical services, resulting from the lack of religious events or long vacations in Q1 2018. Telecommunications The Ministry of Communications obliged companies at the end of the Q3 2017 to lift the ban on internet communications applications. Furthermore, the Communications and Information Technology Commission (CITC) announced a reduction in wholesale cellular interconnection rate to 5.5 halalas instead of 10 halalas. CITC curbed fixed termination rate to 2.1 halalas, instead of 4.5 halalas. This decision came into effect in the last week of December and therefore will have a material impact in Q1 2018. The overall impact will be negative for STC, largely neutral to Mobily and positive to Zain given the difference in market shares. Average Commodity Prices (USD/Ton) Research Team Researchteam@albilad-capital.com Q1 2018 Q1 2017 YoY Q4 2017 QoQ Arab Light Crude Oil 66 53 25% 61 8% Methanol (SE Asia) 397 365 9% 374 6% Polypropylene (SE Asia) 1,278 1,109 15% 1,175 9% Polyethylene - HDPE (SE Asia) 1,358 1,181 15% 1,260 8% Polyethylene - LDPE (SE Asia) 1,250 1,317 (5%) 1,257 (1%) Polystyrene (SE Asia) 1,552 1,426 9% 1,454 7% Ammonia (Middle East) 322 319 1% 307 5% UREA (Middle East) 258 265 (2%) 261 (1%) DAP (Morocco) 419 364 15% 380 10% Gold (USD/Troy ounce) 1,330 1,219 9% 1,277 4% Aluminum (London Metal Exchange) 2,157 1,852 16% 2,107 2% Copper (London Metal Exchange) 6,965 5,831 19% 6,808 2% 1
2. Earnings Estimates Q1 2018 April 3 , 2018 The Following Table Illustrates our Estimates for the First Quarter of 2018 Code / Sector– SAR mn Company Q1 2018E Q1 2017A YoY Q4 2017A QoQ 1020 Aljazira 203 216 (6%) 194 5% 1120 Al Rajhi 2,494 2,221 12% 2,453 1.67% 1150 Alinma 602 421 43% 560 7% 2010 SABIC 5,680 5,240 8% 3,670 55% 2020 SAFCO 430 423 2% 62.51 - 2290 YANSAB 691 608 14% 778 (11%) 2330 Advanced 132 124.4 6% 104 27% 3020 Yamama Cement 34 51 (33%) 17 101% 3030 Saudi Cement 120 165 (27%) 107 12% 3060 Yanbu Cement 91 124 (27%) 96 (5%) 1211 MAADEN 344 276 25% (105) - Bahri 91 379 (76%) 207 (56%) Catering 110 121 (9%) 99 11% Herfy Foods 47 53 (12%) 48 (3%) 4003 Extra 18 13 42% 58 (68%) 4190 Jarir 236 221 7% 252 (6%) 4001 A. Othaim Market 80 60 33% 167 (52%) 4006 Farm Superstores 13 23 (42%) 9 44% 2050 Savola Group 67 4.8 - (38) - 2280 Almarai 314 328 (4%) 513 (39%) 6010 NADEC 4 4.3 (7%) (8) - 4002 Mouwasat 104 85 22% 99 6% 4004 Dallah Health 85 85 0.3% 63 35% 4005 Care 32 16 106.5% 31 4% 4007 Al Hammadi 27 28 (2%) 31 (11%) 7010 STC 2,509 2,527 (1%) 2,649 (5%) 7020 Etihad Etisalat (185) (163) 13% (182) 2% 7030 ZAIN KSA (8) 45 (118%) (45) (82%) Banks Materials Energy 4030 Commercial & Professional Svc 6004 Consumer Services 6002 Retailing Food & Staples Retailing Food & Beverages Health Care Equipment & Svc Telecommunication Services 2
3. Earnings Estimates Q1 2018 April 3 , 2018 Research & Advisory E-mail: research@albilad-capital.com Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research Turki Fadaak Research & Advisory Manager TFadaak@albilad-capital.com Ahmed A. Hindawy, CFA Senior Financial Analyst AA.hindawy@albilad-capital.com Mohammed H. Atiyah Financial Analyst MH.Atiyah@albilad-capital.com Meshal H. Alghaylan Financial Analyst MHAlghaylan@albilad-capital.com Albilad Capital Client Services E-mail: Tel: clientservices@albilad-capital.com +966-11-203-9888 Toll-free: 800-116-0001 Brokerage E-mail: Tel: abicctu@albilad-capital.com +966-11-290-6230 Investment Banking Asset Management E-mail: Tel: E-mail: Tel: Custody abicasset@albilad-capital.com +966-11-290-6280 E-mail: Tel: investmentbanking@albilad-capital.com +966-11-290-6256 custody@albilad-capital.com +966-11-290-6259 Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report. CMA Authorization Number 08100-37 3