Saudi Kayan is expected to swing into profit in the fourth quarter as commercial operations begin after multiple delays and several loss-making quarters, said the Riyadh company Al Rajhi Capital.
The petrochemical company, based in Jubail, started production on October 1 at most of its plants, bringing the utilisation rate to 65 per cent for the fourth quarter, with an increase in production expected over the next two to three months.
The company is expected to report a profit of 546 million Saudi riyals in the fourth quarter on revenues of 2.3 billion riyals.
Saudi Kayan reported a loss of 35.2m riyals in the third quarter and a loss of 16m riyals in the second quarter.
It will be one of the largest petrochemical plants in the world. Apart from basic chemicals, the company's product portfolio includes speciality chemicals such as polycarbonates, phenols, diethanolamine and ethoxylates.
Saudi Basic Industries Corporation, known as Sabic, has a 35 per cent stake in Saudi Kayan, with the rest being split between the petrochemical company Al Kayan and public ownership after an initial public offering for the company in 2008.
Since then Saudi Kayan has faced delays starting up.
The company has net debt of 28.4bn riyals as of the third quarter, which should reduce to about 2.1bn riyals, Al Rajhi said, on the back of healthy operating cash flows.
The debt levels, currently at three times earnings, are "reasonable for a company which has just started commercial operations".
The investment bank upgraded Saudi Kayan's stock to "overweight" from "underweight" and raised the target price from 15.7 riyals to 20.8 riyals.
The shares were up 2.76 per cent yesterday to 18.60 riyals on the Tadawul exchange. The stock has lost more than 10 per cent this year.