The balance sheet of Industries Qatar (IQ) in the first quarter of 2022 remains solid with QR12.6 billion in cash, bank balances and zero long-term debt despite paying QR6 billion in dividends for 2021, QNB Financial Services (QNBFS) has said in a report published on Tuesday.
According to the QNBFS company report, IQ on a proportionate basis generated an operating cash flow of QR2.8 billion and free cash flow of QR2.6 billion in the first quarter of 2022.
Given IQ’s strong balance sheet, the report said, “We expect the company to withstand difficult market conditions when they arise while retaining dry powder to take advantage of potential acquisition opportunities in the future. IQ’s strong FCF generating ability also provides investors with lower DPS volatility.”
“We maintain our Outperform rating on IQ and raise our target price to QR21 from QR19. We will publish our revised estimates factoring in IQ’s performance in the first quarter of 2022. Our sense still remains that earnings for 2022 are likely to be flattish-to-moderately higher relative to 2021,” the report said.
“Volumes are likely to be modestly up YoY in 2022 given QAPCO’s major planned shutdown in the fourth quarter of 2021. Pricing, as usual, remains the major wildcard. While energy, urea prices benefited during the latter-end of the first quarter of 2022 due to the Russia-Ukraine conflict, we have to assume these prices will ease somewhat once this conflict is resolved,” it said.
In terms of longer-term catalysts, the report said, “QAFCO 7 project is also expected to add 400 KTPA of sellable ammonia by 2026. Moreover, similar to the QAFCO deal, IQCD could look to acquire Total’s 20 percent stake in QAPCO, which could also be perceived positively by investors.”