Page1of39SaudiCementSector,cementingthefuture…21May2023CompanyRatingSaudiCementCo.Accumulate(SACCO)CityCementCo.(CITYC)BuyQassimCementCo.(QACCO)HoldYamamaCement(YACCO)AccumulateNeetikaGuptaVicePresident-HeadofResearchneetika@u-capital.netTel:+96879064609➢TheKSAconstructionsectorispoisedforrobustgrowthsupportedbyimprovinggovernmentfiscalpositionamidrecoveryinoilprices.➢Strongmegaprojectspipelineunder“Vision2030”providesstrongdemandvisibilityfortheconstructionmaterialssuchascementintheKSA.➢Favorabledemographicsandrapidurbanizationtopropelhousingdemand,benefittingthecementsector.➢DomesticcementproducerswellpositionedtoleverageconstructionactivityrecoverywithamplecapacityandinventorylevelsWeinitiateourcoverageontheSaudiArabiaCementSectorwithfourcompanies–SaudiCementCo.(SACCO),CityCementCo.(CITYC),QassimCementCo.(QACCO),andYamamaCementCo.(YACCO).Ouroverallviewonthesectorispositive,drivenbysustainableeconomicgrowth,improvingsectordynamicsunderpinnedbymegaprojects,andfavorablehousingdemandsupportedbydemographictrends.Wehaveusedacombinationofdifferentvaluationmethodologies(DCF,DDMandpeer-groupP/EandEV/EBITDAmultiples)toarriveatourtargetprice.•KSAGDPgrowthtomoderateafterastrongFY22.TheKSAeconomyexperiencedasignificantboostinGDPduringFY22,drivenbyapick-upindemandastheeconomyreopenedpostpandemicrelatedlockdownsandanincreaseincrudeoilprices.Thisboostledtoafiscalsurplus,allowingthegovernmenttoincreaseitsspendingonconstructionactivities.Additionally,rapidurbanizationinthecountryhasincreasedthedemandforhousingasyoungpopulationsshifttocities.Thissurgeindemandforhousingandincreasedspendingonconstructionactivitiesisexpectedtobenefitcement,amajorrawmaterialusedinconstruction.Withafocusonconstructionandinfrastructuredevelopment,theSaudiArabianeconomyispoisedforgrowthinthecomingyears.•ConstructionofMegaprojectsunder“Vision2030”toboostdemandforcementinSaudiArabia.SaudiArabiahasplanstodiversifyitseconomyawayfromoilandfocusonothernon-oilsectors.UnderitsVision2030plan,thecoun...
