Revenue declines in 4Q, largely in line with our estimates
Sharqiyah Desalination’s revenue in 4Q 2022 fell 7% YoY to OMR 3.10mn, coming largely in line with our estimate of OMR 3.27mn. We had estimated a ~2% dip in revenue largely owing to gradually falling income on finance lease (4Q22e: c. -5% YoY) as we had expected revenue from the core operations to have remained mostly stable.
Net profit surges YoY despite a dip in earnings before tax, beats our estimate
Sharqiyah’s total expenses, including finance costs, fell at a slightly slower pace than revenue (-1% variance vs. our estimate). As a result, profit before tax declined 30% YoY to OMR 0.17mn (-42% miss). Yet, net profit surged more than 200% YoY to OMR 0.39mn, which likely resulted from a favorable movement in the income tax. As compared to our estimate, the bottom line came in 54% higher.
Maintain target price
Post the 4Q 2022 results, we believe the company remains well placed to be able to comfortably meet our dividend expectations, which form the basis of our valuation. Accordingly, we maintain our OMR 0.145 target price on the company.