SAUDI INTERNATIONAL PETROCHEMICAL COMPANY (SIPCHEM) Update Report. Potential Earnings Recovery

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1 September 26, 217 Rating Buy 12-Month Target Price SAR 18.5 Expected Total Return Price as on Sep-25, 217 SAR Upside to Target Price 18.1% Expected Dividend Yield 3.2% Expected Total Return 21.3% Market Data 52 Week H/L SAR 19.8/11.8 Market Capitalization SAR 5,746 mln Enterprise Value SAR 12,945 mln Shares Outstanding mln Free Float 74.3% 12-Month ADTV.85 mln Bloomberg Code AB 1-Year Price Performance S O N D J F M A M J J A TASI 6M 1Y 2Y 3% 2% SAUDI INTERNATIONAL PETROCHEMICAL COMPANY () Update Report Potential Earnings Recovery We maintain our investment view on Sipchem with a Buy rating as fundamentals improved and stock currently offering an upside of +18%. Despite our slight revision on estimates, our 12-month target price changes feebly to SAR 18.5 from earlier SAR 19.. The investment case factors a combination of attractive valuations and an improved operational outlook on Sipchem s business lines amid an expansion of methanol capacity by 219. We tweak our model and reframe certain set of assumptions, but mainly stress on three aspects (i) improvement in operating rates and product prices (ii) capex, earnings recovery and stability in margins is under-weighed in valuations and iii) merger story could bring in long term synergies for Sipchem. Valuations are at favorable levels with its 218E P/E of 13.x cheaper to SABIC-14.2x, Yansab-13.3x, Sector-15.4x and TASI s 14.5x. The stock offers excellent risk-reward profile; dividends are set to improve to SAR 1. by 219, continue to recommend Buy. Volume-price mix could trend upwards Healthy utilization rates and uptick in product prices are the key attributes for its +2% revenue CAGR for Sipchem has seen 5-6 shutdowns over the last 3-4 years, which has taken down average utilization rates to 87% during ; we expect to average 88% for E price CAGR of +5% for Vinyl Acetate Monomer (VAM) and +4% in Acetic Acid (AA) are the key value drivers aiding our revenue assumptions. We expect price to be driven by robust demand from its key markets especially Europe and Asia. Earnings recovery in sight EPS CAGR of +5% for E amid a quadruple rise in earnings in 217 is barely priced in the stock; trades at irresistibly low levels. We believe, the trend is not monetized as -17% YTD return in stock prices is inapt and market has underestimated such earnings recovery. In addition, margin stability (EBIT margins at 2% through 219) and spread expansion are prudent factors driving earnings quality. We expect price recovery in methanol, VAM and AA is likely to aid further margin growth. Merger could bring synergies A possible merger theory on Sipchem-Sahara could bring in large operational synergy and benefit shareholders considering the quality of promoters in both the entities. We believe investors are impatient of this qualitative drive as valuations are less reflective of such an expected event. The combined entity could create excellence and improvement in value chain to create the fifth largest petrochemical company in KSA. 1% % -1% -2% TASI Shareholding Al Zamil Holding 9.7% Ikarus Holding 8.2% PPA 7.8% Public Float 74.3% Key Financial Figures FY Dec31 (SAR mln) 215A 216A 217E 218E 219E Revenue 3,515 3,367 4,185 4,64 4,9 EBITDA 1,264 1,165 1,539 1,776 1,97 Net Income EPS (SAR) DPS (SAR) P/E (x) 2.x 82.3x 18.3x 13.x 11.4x P/B (x) 1.x 1.x 1.x.9x.9x EV/EBITDA (x) 1.3x 11.1x 8.4x 7.3x 6.8x Santhosh Balakrishnan Abdullah A. Al Rayes Riyad Capital is licensed by the Saudi Arabia santhosh.balakrishnan@riyadcapital.com abdullah.a.alrayes@riyadcapital.com Capital Market Authority (No )

2 Investment Profile: Sipchem Company Profile Established in 1999 and headquartered in KSA, Sipchem is one of the medium sized petrochemical producers in KSA. It primarily operates in the intermediate petrochemical space producing specialty chemicals through its subsidiaries, which are vertically and horizontally integrated; also well aligned. Its key market continues to be Asia with 36%, followed by Europe with 26%, while there are inter-company transactions leading to 3% sales from KSA and rest are from MENA. Sipchem s key subsidiaries with its share of investment are: International Methanol Company (IMC) with 65%, International Gases Company (IGC) with 72%, International Diol Company (IDC) with 54%, International Acetyl Company (IAC) with 87%, International Vinyl Acetate Company (IVC) with 87%, International Polymers Company (IPC) with 75% and Sipchem Chemicals Company (SCC) with 95%. IMC manufactures and sells methanol with a nameplate capacity of 97K tons. IMC is under agreement to supply 248, ton/year and 8, tons/year of methanol to IAC & IDC, respectively. IDC produces and sells Butanediol (BDO) & its derivatives with production capacity of 76K tons. The IMC gets supplied 4, bbl/d of butane from Saudi Aramco. IDC has a long-term contract with Vinmar International Ltd, and Will & Co. IGC produces carbon monoxide (CO) and has a capacity of 345K tons and 65K tons of hydrogen, which is used as a feedstock at IAC. The company is under agreement to supply 24, tons/year of CO to IAC. IAC produces Acetic Acid (AA) and further used to process Vinyl Acetate Monomer (VAM) from IVC plant with 46K tons of capacity. The complex is utilizing Eastman technology to derive AA & Aan products. IVC produces VAM with 33K tons of capacity and further used to process to produce AA & Aan products. IPC produces EVA and LDPE with 2K tons of capacity. 214A 215A 216A 217E 218E 219E Income Statement (SAR mln) Revenue 4,75 3,515 3,367 4,185 4,64 4,9 Gross Profit 1, ,13 1,392 1,519 EBITDA 1,742 1,264 1,165 1,539 1,776 1,97 Operating Profit 1, ,41 Net Income Balance Sheet (SAR mln) Current Assets 4,63 3,575 3,37 3,478 4,52 4,481 Non-Current Assets 13,148 13,484 13,193 12,917 12,538 12,171 Total Assets 17,211 17,59 16,5 16,395 16,59 16,652 Current Liabilities 1,565 1,79 2,91 2,179 2,246 2,27 Non-Current Liabilities 7,683 7,565 6,91 6,652 6,41 6,184 Total Liabilities 9,248 9,354 9, 8,831 8,657 8,454 Shareholders Equity 7,963 7,75 7,5 7,564 7,933 8,198 Total Liab & Equity 17,211 17,59 16,5 16,395 16,59 16,652 Cash Flows (SAR mln) CFO 1, ,63 1,25 CFI (1,496) (1,27) (812) (721) (948) (976) CFF (57) (234) (426) (743) (729) (715) Valuation P/E 9.3x 2.x 82.3x 18.3x 13.x 11.4x P/B 1.x 1.x 1.x 1.x.9x.9x EV/Sales 3.2x 3.7x 3.9x 3.1x 2.8x 2.6x EV/EBITDA 7.4x 1.3x 11.1x 8.4x 7.3x 6.8x Dividend Yield 8.% 3.2% 3.2% 3.2% 4.8% 6.4% Growth Sales 2% -14% -4% 24% 11% 6% Gross Profit 3% -38% -17% 64% 23% 9% EBITDA 2% -27% -8% 32% 15% 7% Net Income -1% -53% -76% 349% 41% 13% Margins Gross 33% 24% 21% 27% 3% 31% EBITDA 43% 36% 35% 37% 38% 39% Net Margins 15% 8% 2% 8% 1% 1% Key Ratio's Net Debt to EBITDA Debt to Equity Current Ratio ROA 6.9% 3.3% 2.5% 4.6% 5.8% 6.3% ROE 8.% 3.7%.9% 4.2% 5.7% 6.2% Per Share (SAR) EPS BVPS DPS Source: Company reports, Riyad Capital Page 2 of 2

3 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Sector Update Oil and product prices correlations trending down A slight fall in crude oil prices during 1H217 by -7% Q/Q has resulted in similar subdued trends in petrochemical product prices. The is barely mimicked in the producer composite index, as Bloomberg Basic and Diversified Chemical Index (BDCI) increased by +16% in 1H217 after its sharp rally of +26% in 216, suggests investors positive momentum. The OPEC deal has put limited control on producer s agreed production cuts causing prices to fluctuate as producers focus to retain market share, with Saudi Arabia crude production hitting record levels. The inputs from EIA on oil markets points to a steadiness and forecasts USD 53/bbl on an average for 217, while the average oil prices (Brent) on a YTD basis stands at USD 46/bbl. A positively correlated trend is expected in petrochemical prices amid fluctuations in operating rates, be it on basic or intermediate or specialty space. On the feedstock front, NGL s have declined by -12% with natural gas prices at USD 3.1/mmbtu as of 1H217, while other NGL s (propane, butane and naphtha) have seen similar volatility are on a downswing since 2Q217. We expect NGL prices to move up as winter season approaches in Europe. Overall demand on petrochemicals is influenced by Asian economies particularly China. In this section, we focus on Sipchem s positioning and understand the relative dynamics of demand and pricing. Exhibit 1: Oil Prices Trends vs Average (USD/bbl) Brent 5 Yr Avg 3Yr Avg 1 Yr Avg Exhibit 2: Bloomberg Petchem Index Vs Oil Prices Bloomberg Petchem Index (LHS) Brent-USD/bbl (RHS) Product prices seeing some volatility Sipchem primarily operates in VAM, AA, EVA, LLDPE, BDO but mainly in Methanol through its different subsidiaries providing a host of vertical and horizontal integration. Sipchem s product prices have not recovered in 2Q217 with a Q/Q fall in methanol prices by -23%, AA by -4% and VAM by -5% amid movement in oil prices. Exhibit 3: Price Trends for Sipchem Products (USD/MT) Exhibit 4: Price Trends for Sipchem Feedstock 16 Ethylene-LHS VAM-LHS AA-RHS 7 55 Methanol (USD/MT)-LHS NG(USD/mmbtu)-RHS Page 3 of 2

4 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 #1 Methanol: Shifting output-supply gap in methanol The global demand for methanol is on a rise after a small supply-demand gap primarily influenced by Asian markets. China is the major driver of growth in the methanol space, with its sustained demand due to China s increasingly Methanol to Olefin (MTO) projects, we believe demand pullback is unlikely. China holds 58% of the global demand and 48% of global supply, with the supply gap covered by imports. Methanol s price directions are partially influenced from Asia (including China) which holds around 7% of the total demand. Global demand for methanol is expected to grow at 7% CAGR as per IHS and stated to reach 112 million MT by 221. On the supply side, there is slight overcapacity, hence producers opted to have operating rates around 75-8%. However, capacities continue to increase in this segment as most projects were initiated during a boom 27-8 period which has resulted in slight backlash after the 28 crisis. As demand picks-up we believe this capacity build-up is absorbed. Exhibit 5: Global Methanol Supply & Capacity (mln Tons) Exhibit 6: Global Methanol Supply Proportion China 58% North America 1% S.America 2% 4 Europe 13% Capacity Supply Asia Ex- China 12% MEA 5% Source: Nexant, Bloomberg Source: Nexant, Bloomberg On a micro level, Sipchem has one of the highest methanol capacity in KSA supported by Aramco s supply of natural gas, a daily quota of 124K MBTU and priced at USD 1.25/mmbtu. We believe gradual removal of fuel subsidy could put most producers under pressure, an industry wide risk. Methanol prices have averaged USD 241/MT in 216, which is almost 47% lower to it highs of USD 484/ton in 1Q214. We expect NG to Methanol spreads to improve to 4% (historically averaged 4%) from 36% as of 2Q217. Spreads on an absolute basis have averaged USD 14/ton during 216. Exhibit 7: M ethanol and NG Price Trends 6. Methanol(USD/MT)-RHS NG (USD/mmbtu)-LHS Page 4 of 2

5 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 In terms of methanol consumption, Formaldehyde producers accounts to 4% of methanol consumption. The use of such aldehyde is used in production of urea, phenol and melamine-formaldehyde resins. AA, the second highest derivative from methanol accounts to 13% of consumption. Sipchem is advantaged with such forward integration chain as it produces AA. #2 VAM: On a steady rise, expect demand of +6% CAGR The global demand for VAM is on a steady rise with 6.3 million MT of VAM by 22, majorly driven by Asia, with a CAGR of +6% through 22. China with its 33% share of demand continues to be the major market for VAM. We expect supply to be at par and tuned in-line with demand as global producers face the brunt of excess inventory, which has an influence on prices. VAM production is expected to grow at +7% CAGR through 22, with limited scope for inventory buildup as curb in supply during 213 in Europe and South America has put limited scope for overcapacity. We do not expect large increase in supply and expect demand and supply to see an equidistant approach, despite VAM capacities ramping up in China and US, do not pose a major risk. Sipchem is the only and largest producer of VAM in KSA. Celanese (Singapore), Dow Chemicals and Sinopec are some of the major global producers of VAM. Exhibit 8: Global VAM Demand (mln Tons) Exhibit 9: Global VAM Demand Proportion USA 2% MEA 3% Europe 18% E 218E 219E 22E Source: Nexant, Bloomberg China 33% Source: Nexant, Bloomberg Asia Ex- China 24% S.America 2% We believe a combination of higher operating rates and prices in VAM segment is expected to drive, with operating rates globally having averaged at 69% during This is expected to improve to 72% by 22 as per Nexant. Average VAM prices have reached at USD 851/ton in 1H217 declining by -5% Y/Y, still lower since 2H216. Exhibit 1: V AM Spreads to M ethanol and AA Price Trends (USD/M T) VAM-Spreads-RHS Methanol-LHS AA-LHS Page 5 of 2

6 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 However, combined feedstock spreads (spread from VAM using 7% Methanol and 3% of AA) of USD 254/ton in 1H217 has contracted significantly with cost curve at heightened levels, meaning VAM prices at USD 851/ton is not advantageous enough versus its cost of USD 594/ton. We believe global VAM producers are at a disadvantage currently as prices do not see the required support and expect to improve, though Sipchem could be less affected due to presence of subsidized feedstock. VAM is mainly used in the manufacture of furniture glue and adhesives, its major derivate product is Polyvinyl Alcohol (PVOH) and Polyvinyl Acetate (PVA), which accounts for 83% of total VAM consumption. #3 Acetic Acid: Integration plays the key, AA demand to grow at +3% Sipchem is the one of the largest AA producer in KSA with its 4 KTA of capacity, accounts for 18-2% of its total capacity; we believe this is key to Sipchem s volume growth. Globally, AA business is a 19.1 million MT market as of 216 with Sipchem roughly having a share of 2%. On the demand front, 67% is from Asia, primarily driven by China with its 42%. According to Nexant research, the AA market is expected to grow at 3% CAGR during We expect supply also in-line with demand as producers align operating rates to control the perils of overcapacity. AA production is expected to grow +4% CAGR through 22 to 15.2 million MT by 22. The major derivate from AA are VAM and EVA, accounts for 4% of total AA consumption. Exhibit 11: Global AA Capacity and Demand (Mln Tons) Exhibit 12: Global AA Demand Proportion USA 16% MEA 4% Europe 11% South America 2% China 42% Asia Ex- China 25% E 218E 219E 22E Source: Nexant, Bloomberg Capacity Demand Source: Nexant, Bloomberg Nexant expect operating rates to improve to 74% over the next three years from 71%, during On the price front, AA prices have reached an average of USD 412/ton in 1H217 with prices increasing by +33% Y/Y after its rally in 3Q216. Exhibit 13: AA and M ethanol Price Trends (USD/M T) Methanol-LHS AA-RHS Page 6 of 2

7 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Retail Food/Agri Cement Banks Petchem Telecom* Healthcare Real Estate 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17-69% -41% -49% -48% -2% -3% -2% -31% -25% -6% -26% -13% -29% 17% 6% 86% With Methanol and Carbon monoxide as its key cost component, cost curve seems to have mimicked methanol prices closely. A direct spread between methanol and AA suggest that spread of USD 127/ton are at improved levels. 2Q217 sector earnings performance was below expectations KSA petrochemicals sector reported relatively better numbers in 2Q217 versus other sectors as domestic slowdown did not materially impact. Despite its subdued numbers in 2Q217 due to slowing product prices and shut downs, sector was relatively positioned safer. Exhibit-14 compares key sectors in TASI, while comparing oil correlations in Exhibit-15. Poor earnings from few had affected the combined earnings of the sector in 2Q217, while the full cycle earnings (Kayan, SIIG, Advanced) looks comparatively better versus peers. The positive earnings stride in 1Q is not replicated in 2Q217, as 1Q earnings beat most analyst expectations while outperforming TASI. Overall, earnings from petrochemical sector in 2Q217 registered a -31% Y/Y and -25% Q/Q decline to SAR 5.1 billion. Exhibit 14: Sector's Earnings Performance in 2Q217 Exhibit 15: Petrochemical Earnings Growth vs Oil Prices Q/Q Y/Y 1% 9% 88% 4% 8% 3% 6% 4% 29% 45% 2% 2% 3% 2% 1% 1% % -2% -4% -28% -36% -1% -1% -25% -31% % -1% -6% -8% -6% -2% -3% Earnings growth-lhs Oil Price Q/Q-RHS Profitability concerns in 2Q217 as margins drops KSA petrochemicals sector reported a fall in topline due to dual impact of falling petrochemical prices, while shutdown added to the fury taking revenue numbers to SAR 48 billion in 2Q217, a decline of -6% Q/Q and -2% Y/Y. However, poor earnings this time were partially driven by SAFCO, SABIC which missed street and our expectation widely, while Yansab and Sipchem had impact of shutdown,which has led to sharp fall in earnings in 2Q217. As a result, earnings from the sector fell sharply below expectations. Exhibit 16: Petrochemical Revenue and Oil Price Trends Exhibit 17: Petrochemical Earnings % 15% 13% 11% 9% 7% 5% Revenue (SAR Bln)-LHS Avg.Brent Price (US$/bbl)-RHS Earnings (SAR Bln)-LHS Net Margins-RHS Page 7 of 2

8 KSA petchems: Cheap valuations versus sector and peers KSA petchems trade at par to global peers though slightly expensive to TASI P/E as the bear oil cycle has pushed global petrochemical cycle valuations lower by 15-2% range. The sector trades at 218E consensus P/E of 15.4x while Sipchem trades at consensus P/E of 12.4x and currently offers 25-3% discount to sector, the deviation from our target prices also bodes well. We believe, with multi-product exposure and its offering in the specialty chemical space, Sipchem commands a better valuation amid its attractive risk-reward profile. The stock is priced attractively versus Yansab and SABIC 218E P/E, which trades at 13.5x and 14.6x respectively. Table 1: Global Petrochemicals Co's Comparables Valuation Company Name Country Mcap US$ Bln EV US$ Bln P/E P/B EV/ EBITDA Div. Yld 217E 218E 219E 217E 218E 219E 217E 218E 219E 217E 218E 219E Orica Ltd Australia x 17.9x 16.6x 2.6x 2.5x 2.4x 8.5x 9.7x 9.7x 2.6% 2.7% 3.% 13% Lenzing AG Austria x 11.7x 1.8x 2.4x 2.2x 1.9x 6.6x 8.3x 8.3x 2.4% 2.9% 2.9% 9% Braskem SA Brazil x 12.3x 1.9x 5.4x 5.5x 4.1x 2.9x 4.2x 4.2x 2.9% 3.1% 3.2% 27% Sinopec Shanghai PetrochemicaChina x 11.3x 11.5x 2.8x 2.5x 2.2x 7.2x 7.1x 6.9x 3.9% 2.9% 2.4% (1%) Wanhua Chemical Group Co Ltd China x 11.4x 1.4x 5.x 4.6x 3.5x 8.5x 8.9x 9.3x 1.1% 2.1% 2.5% 116% Air Liquide SA France x 19.x 17.3x 2.7x 2.4x 2.2x 13.x 11.1x 11.1x 2.4% 2.5% 2.7% 4% BASF SE Germany x 15.1x 14.x 2.6x 2.4x 2.3x 8.3x 7.7x 7.7x 3.4% 3.5% 3.7% % Linde AG Germany x 19.9x 18.5x 2.2x 2.x 1.9x 9.1x 9.9x 9.9x 2.2% 2.4% 2.5% 6% Reliance Industries Ltd India x 15.x 14.x 1.8x 1.7x 1.6x 24.6x 11.6x 11.6x.7%.8%.8% 51% Sumitomo Chemical Co Ltd Japan x 9.9x 1.3x 1.4x 1.3x 1.2x 6.6x 8.2x 8.2x 2.% 2.1% 2.3% 26% Mitsui Chemicals Inc Japan x 9.3x 9.1x 1.5x 1.4x 1.2x 7.4x 6.8x 6.8x 2.4% 2.5% 2.6% 3% Petronas Chemicals Group Bhd Malaysia x 16.4x 15.4x 2.1x 2.x 1.9x 9.1x 7.9x 7.9x 3.3% 3.1% 3.% 5% Alpek SAB de CV Mexico x 11.1x 9.1x 1.1x 1.1x 1.1x 7.7x 6.8x 6.8x 3.4% 6.3% 6.7% (29%) Industries Qatar QSC Qatar x 12.8x 12.5x 1.7x 1.6x 1.6x 6.2x 6.1x 6.4x 4.4% 5.1% 5.6% (23%) Saudi Basic Industries Corp KSA x 14.6x 13.7x 1.9x 1.8x 1.8x 7.x 7.9x 7.9x 4.% 4.7% 4.8% 1% Yanbu National Petrochemical C KSA x 13.5x 14.5x 2.2x 2.1x 2.1x 6.9x 8.9x 8.9x 5.1% 5.6% 6.2% 1% Saudi Kayan Petrochemical Co KSA x 13.8x 17.3x 1.x 1.x.9x 11.8x 8.8x 8.8x NM NM NM 3% National Petrochemical Co KSA x 11.6x 13.9x 1.4x 1.3x 1.2x 8.1x 11.2x 11.2x 2.8% 3.3% 3.6% (15%) Saudi Industrial Investment Gr KSA x 9.9x 9.3x 1.5x 1.4x 1.3x 8.8x 13.x 13.x 2.4% 4.8% 4.8% 12% Sahara Petrochemical Co KSA x 14.4x 13.2x 1.2x 1.1x 1.1x 15.4x 16.8x 16.8x 5.4% 5.9% 6.% (6%) Advanced Petrochemical Co KSA x 12.5x 14.3x 3.2x 2.9x 2.8x 8.3x 11.1x 11.1x 6.1% 6.1% 6.1% (%) KSA x 12.4x 9.6x 1.1x.9x.9x 7.2x 6.8x 6.4x 2.9% 2.1% 2.9% (17%) LG Chem Ltd South Korea x 13.x 12.3x 1.7x 1.8x 1.6x 4.3x 3.6x 5.6x 1.4% 1.5% 1.5% 41% Formosa Chemicals & Fibre CorpTaiw an x 12.3x 12.4x 1.8x 1.6x 1.6x 1.8x 11.4x 11.4x 6.% 5.8% 5.6% (3%) PTT Global Chemical PCL Thailand x 1.5x 1.2x 1.4x 1.3x 1.3x 7.3x 5.7x 5.7x 4.3% 4.3% 4.4% 24% EI du Pont de Nemours & Co USA x 2.2x 19.3x 6.x 6.2x 5.9x 14.3x 16.7x 16.7x 1.8% 1.8% 1.9% 14% LyondellBasell Industries NV USA x 1.7x 1.6x 5.6x 5.3x 4.6x 6.6x 6.6x 6.6x 3.7% 3.7% 3.8% 13% YTD Data updated as of Sep 21, 217 Merger is a positive if materializes We see a continued possibility of a merger between Sipchem and Sahara, which is expected to bring in large operational synergy. We believe the combined entity with similar quality of promoters could create value to both entities, be it minority or majority shareholders and likely to bring in some integration benefits in its value chain. Page 8 of 2

9 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q E 218E 219E 4,75 3,515 3,367 4,185 4,64 4,9 Financial Analysis Revisions driven by changes in product price outlook and margins In our update report on Sipchem, we revisit some of the assumptions and revise our outlook for E due to impact of partial shutdowns and earnings surprises over the last two quarters. We also revise our forecasts on product prices after it witnessed volatility and also change our price assumptions. After revision, expect a stable growth in topline with steady operating rates as Sipchem has not announced any planned shutdowns for rest of 217. We expect operating rates to be at 88% average for Table 2: Change s in Estimate s (SAR mln)-rc ve rsus Co nse nsus RC Estimates (Old) RC Estimates (new ) Consensus (New ) Est.Revision (RC.) 217E 218E 219E 217E 218E 219E 217E 218E 219E 217E 218E 219E Revenue 4,456 4,59 4,784 4,185 4,64 4,9 4,374 4,569 4,681-6% 1% 2% Y/Y 32% 3% 4% 24% 11% 6% 3% 4% 2% Gross Profit 1,159 1, ,13 1,392 1,519 1,233 1,343 1,432-3% 1% 1% Y/Y 68% 9% 9% 64% 23% 9% 79% 9% 7% EBITDA 1,574 1, ,539 1,776 1,97 1,58 1,645 1,876-2% 6% 2% Y/Y 35% 7% 11% 32% 15% 7% 29% 9% 14% EBIT , , ,9 1,186-1% -3% 1% Y/Y 1% 17% 5% 81% 26% 9% 131% 13% 9% Net Income % -5% 6% Y/Y 49% 13% 3% 349% 41% 13% 485% 22% 21% EPS (SAR) % -5% 6% Source: Riyad Capital, Bloomberg Revenue growth to be modest Revenue is set to grow at +2% CAGR on expectations of improvement in prices especially for VAM and AA, a rebased trend (Exhibit-19) suggest the increasing correlations. Revenue growth is expected to be driven by dual impact of uptick in product prices and operating rates, with VAM prices projected to grow to USD 948/ton and AA to reach USD 492/ton by 219. After a large correction in 216, AA and VAM have not significantly improved. The management expects smooth functioning of most plants with no major planned maintenance in 217. On a plant basis, we expect IVC and IAC to operate at decent operating rates, while expect others to continue at consistent rates, barring any unplanned shutdowns. We have kept some cushion for shutdown, though tweaked upwards our growth rates in Exhibit 18: Revenue (SAR mln) and Growth Forecasts Revenue YoY 3% 2% 1% % -1% -2% Exhibit 19: Qtrly Revenue vs Product Prices (Rebased) Revenue (SAR mln)-lhs AA-RHS Methanol-RHS VAM-RHS 1,2 14% 13% 1,1 12% 1, 11% 1% 9 9% 8 8% 7% 7 6% 6 5% Source: Riyad Capital, Company Reports Source: Riyad Capital, Company Reports Page 9 of 2

10 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Feedstock spreads to improve Operating costs are expected to be in-line unless we see unplanned shutdown, which we see as the major risk. With locally priced methane and carbon monoxide, we see Sipchem to be at an advantage versus global peers. However, some feedstock like ethylene is processed by its co-entities with arrangements from its peers. With integrated nature of its five plants, Sipchem is relatively shock proof from integration related issues leading to lesser operational risks and thereby gaining significant operational synergies. Our close take on correlations between feedstock spreads and COGS as % of sales is depicted in Exhibits 2-23 have given some clear view on the trends in cost drivers and its effect on Sipchem s profitability. Exhibit 2: COGS Trends to Changes in AA Prices Exhibit 21: COGS Trends to Changes in Ethylene prices 9% 85% 8% 75% 7% 65% 6% 55% AA (USD/MT)-RHS COGS-LHS % 85% 8% 75% 7% 65% 6% 55% Ethylene (USD/MT)-RHS COGS-LHS Source: Nexant, Bloomberg Source: Nexant, Bloomberg The chart on Exhibit-22 and 23 on COGS compares the international prices of methanol, AA and ethylene, gives a strong correlation of Sipchem s variability in margins over the past few quarters. However, we do not see enough clarity on the exact mark-up between its subsidiaries, hence not accurate. Overall, we expect COGS to be at 71% average for , as depreciation is high, which we believe is normal for capital-intensive industries like Petrochemicals. Exhibit 22: COGS and Rebased Trends on Feedstock COGS-LHS AA-RHS 9% Ethylene-RHS NG-RHS 85% 8% 75% 7% 65% 6% 55% 5% 14% 13% 12% 11% 1% 9% 8% 7% 6% 5% Exhibit 23: Global Methanol Prices and NGL trends Methanol (USD/MT)-LHS NG Costs (USD/MT)-RHS Source: Nexant, Bloomberg Source: Nexant, Bloomberg Spreads expansion could direct profitability We expect gross profit to grow at +3% CAGR for to SAR 1,519 million as costs are expected to decline amid higher chances of spreads expansion. We believe methanol spreads are set to improve and could have a cost advantage on its end pricing, while expect VAM spreads also to recover which are predominantly at lower levels. D&A costs are higher for at 21%, which is slowly decelerating to 18% of sales for Historically, D&A costs averaged 14% during when Phase-3 was under development and increased higher as Sipchem commissioned its project in Page 1 of 2

11 E 218E 219E E 218E 219E E 218E 219E E 218E 219E ,264 1,165 1,343 1,13 1,392 1,742 1,539 1,776 1,519 1,97 We expect EBITDA margins to average at 38% during the same period and CAGR of +2% is expected through 219 in EBITDA to reach SAR 1,97 million. We expect SG&A costs at 9.5% of sales over , with average operating margins of 2% over the next three years. As a result, Sipchem is expected to see operating profit of SAR 1,41 million by 219. Exhibit 24: Gross Profit (SAR mln) and Margin Forecasts Gross Profit Gross Margins 32% Exhibit 25: EBITDA (SAR mln) and Margin Forecasts EBITDA EBITDA Margins 44% 28% 42% 4% 24% 38% 36% 2% 34% Source: Riyad Capital, Company Reports Source: Riyad Capital, Company Reports Earnings growth of +5% is expected Sipchem is expected to see a slight rise in effective interest rate due to incremental SAIBOR. We do not see any substantial rise in non-operating income, despite Sipchem recording non-operating income (investment income) of SAR 38 million in 216. Overall, forecast earnings growth of 5% CAGR through 219 and reach SAR 54 million by 219. Exhibit 26: Net Profit Forecasts (SAR mln) Exhibit 27: EPS and DPS Trends Net profit Net Margins 16% EPS DPS 14% 12% 1% 8% 6% 4% 2% % Source: Riyad Capital, Company Reports Source: Riyad Capital, Company Reports EPS of SAR.86 for 217 is forecasted and expected to reach SAR 1.37 by 219. However, the slight rise in earnings do not warrant any large increase in dividends as debt repayment is also in focus. We expect DPS of SAR.5 for 217 and improve to SAR.75 in 218 and SAR 1. in 219. Highly leveraged balance sheet Sipchem has nearly SAR 7.4 billion of debt as of 1H217 and cash of SAR 1.2 billion is available, making a relatively stress free liquidity position. Other areas where we have slight concern is its inventory management and its cash cycle, which we expect to improve in the coming years. Page 11 of 2

12 E 218E 219E E 218E 219E.9% 2.5% 3.7% 3.3% 4.2% 4.6% 5,932 6,2 6,662 6,329 6,13 5, % 5.8% 6.9% 6.2% 6.3% 8.% We expect Sipchem to deleverage eventually taking-off pressure on its interest coverage, hence expected to improve gradually. Sipchem has an improving balance sheet though poor return ratios become a concern which is common in petrochemical sector. Exhibit 28: Return Ratio Trends Exhibit 29: Total Debt (SAR mln) and Net Debt to EBITDA ROE ROA Total Debt Net Debt to EBITDA Source: Riyad Capital, Company Reports Source: Riyad Capital, Company Reports 2Q217 Results Revenue of SAR 1.1 billion in 2Q217 beat our SAR 857 million expectations as we expected impact of shutdown to be much higher. We expect Sipchem to have managed volumes from its inventories. Revenue increased by +4% Y/Y but declined by -23% Q/Q due to lower Q/Q volume sales. Most margins improved except net margins that slightly declined to 7% as impact of interest costs has played a dampener in 2Q217. Earnings of SAR 6 million in 2Q217 was despite a shutdown and beat our SAR 3 million and streets SAR 42 million. Table 3: Quarterly Income Statement Summary (SAR mln) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17E Revenue 917 1,159 1, , , ,78 Q/Q -23% 26% -14% -2% -16% 22% -2% 8% 6% -5% -23% 34% 31% -23% 17% Gross Profit Q/Q -45% 126% -4% 2% -23% 23% -27% -51% 164% -39% -49% 154% 65% -2% 1% EBITDA Q/Q -43% 99% -3% % -21% 22% -17% -36% 92% -33% -47% 164% 6% -16% 16% EBIT Q/Q -54% 174% -41% -3% -33% 29% -31% -81% 562% -5% -76% 458% 72% -24% 17% Net Income (59) Q/Q -65% 256% -34% -18% -39% 37% -35% -64% 9% -47% -327% -189% 75% -35% 42% EPS (SAR) (.16) Gross Margins 24% 43% 3% 31% 28% 29% 26% 12% 29% 19% 12% 23% 29% 31% 29% EBITDA Margins 33% 51% 42% 42% 4% 4% 41% 25% 45% 31% 21% 42% 34% 37% 37% EBIT Margins 18% 4% 27% 27% 21% 23% 19% 3% 21% 11% 4% 15% 19% 19% 19% Net Margins 7% 21% 16% 13% 1% 11% 9% 3% 5% 3% -9% 6% 8% 7% 8% Source: Company Reports Page 12 of 2

13 WACC Valuation Revise TP to SAR 18.5 and maintain Buy We roll forward and update our models to value Sipchem using both absolute and relative valuation. Sipchem has almost entered in to a mid-cycle after Phase-3 with limited expansions planned and is in the process of deleveraging its high debt base. We value Sipchem using weighted DCF and target P/E method to arrive at a weighted target price of SAR We also applied a target multiple method of valuing Sipchem which derived SAR using P/E. Amongst the valuation approaches we prefer weighted method (assigned weights: 65% P/E and 35% DCF) to derive our 218-end target price of SAR 18.5 from earlier SAR 19.. We maintain our Buy rating. # DCF method: Fair value at SAR Our DCF valuation with forecasts assumed for 218-2E uses a long-term terminal growth rate of 1.% and risk-free rate assumption of 3.7%, which includes a premium over 1-year US risk-free rate of 1.9%. WACC of 8.9% is assumed as the discount rate assuming a capital structure (Equity: Debt) of 4:6, while cost of equity of 1.9% is assumed. Table 4: Discounted Cashflow Valuation Fig in SAR Mln 218E 219E 22E Assumptions NOPLAT ,39 Cost of equity 1.9% Add: Depreciation &Amortization After tax cost of debt 5.9% Change in w orking capital (79) (39) (41) WACC 8.9% Less: Capex (694) (722) (751) Zakat (tax) rate 2.5% Net Adjustments in WC, CAPEX and D&A Terminal Grow th rate 1.% Free Cash Flow to Firm (FCFF) 966 1,15 1,149 Risk free rate 3.7% PV of FCFF Market Return 1.2% DCF Valuation Market Risk Premium 6.5% Terminal Value 14,794 LT Debt/Equity 4.% PV of Terminal Value 11,463 LT Equity Capital/Debt 6.% Value of the firm 14,175 Potential Upside 34.7% Less: Net Debt (4,74) 5 Yr Weekly Adj.Beta 1.1 Less: Minority Interest (1,78) Market Cap (SAR Mln) 5,764 Add: investment in Associates Enterprise Value (SAR Mln) 12,965 Value of equity 7,763 Shares O/S (Mln) 367 Value Per Share (SAR) Stock price (SAR) Source: Riyad Capital Table 5: Sensitivity Analysis of WACC and Term inal Growth Rate Terminal Grow th Rate %.3%.5%.8% 1.% 1.3% 1.5% 1.8% 2.% 2.3% 2.5% 2.8% 3.% 3.3% 3.5% 3.8% 7.3% % % % % % % % Source: Riyad Capital Page 13 of 2

14 P/E Range(x) Risks to valuation A large fall in oil and natural gas prices can have an impact on global methanol prices as these are highly correlated to Sipchem revenues and margins. The shutdown in any of the plants can have a cascading effect as most plants are integrated which could have a large downside impact on our estimates. Any sudden removal of fuel subsidies also could lead to devastating effect on margins and could result in losing advantage over global peers. Sipchem relies on Aramco for CO, methane while it relies on processing of ethane from third parties. Further, any slowdown in demand from end markets could prove to be a negative for growth as Sipchem exports more than half of its product to Asia and MENA. The impact of any inter-company adjustments due to the presence of subsidiaries may affect earnings incase of write-downs. # Target P/E method: Fair value at SAR We value Sipchem using target P/E based method and derive a fair value of SAR For Sipchem, we assigned a small premium to KSA mid-cap s Petchem sector P/E of 12.5x due to its nature of operation and its focus on specialty chemicals. We believe Sipchem s historical valuation band and its 12-month average P/E of 13.1x bodes well with the target multiple of 14.x (TASI is at 14.5x). We consider multiples of the last two years to be apt, as the new plant was commissioned in 213 and operational over the last 2 years despite intermittent shutdowns. Market has historically rated the stock on a cautious view, due to impact of continuous shutdowns. Table 6: Price Sensitivity and Target P/ E Valuation using Bear-Base-Bull Case EPS Estimates 216A 217E 218E 219E 22E Actuals Bear Base Bull Bear Base Bull Bear Base Bull Bear Base Bull EPS (SAR) x 2.29 # x 2.48 # x 2.67 # x 2.86 # x 3.6 # x 3.25 # x 3.44 # x 3.63 # x 3.82 # Valuation based on P/E 217E 218E 219E 22E Net profit estimates (SAR Mln) EPS (SAR) P/E based valuation (SAR) Valuation at 2 year historical average of 12.x Based on a sector mid-cap average 218E consensus P/E of 12.5x Estimated valuation at P/E of 14.x Source: Riyad Capital Page 14 of 2

15 E EPS CAGR Sipchem earnings bands tightens Sipchem trades at attractive levels with a different band and offers a lower P/E multiples with a consensus E average P/E of 12.3x vs its EPS growth of +5%, reasonably attractive in the sector. Our 218E P/E of 13.x also matches slightly with consensus; we believe barely few stocks offer this kind of risk reward ratio. We favor Sipchem as a valuation pick amid its long-term play and in midst of a pure earnings recovery. Exhibit 3: KSA Petrochem icals Sector Valuation-Consensus EPS Growth Vs P/ E 14.% 12.% Saudi Kay an 1.% 8.% 6.% SIIG Petrochem Sector 4.% Sipchem Adv anced YANSAB 2.% Sahara SABIC SAFCO.% E Average Bloomberg Consensus P/E ; P/E and EPS is RC estimates Valuation offers better risk-reward profile We believe Sipchem is expected to see gradual deleveraging and offers room for investors a better proportion for a long-term play. Sipchem is priced attractively, despite TTM P/E of 4.x as its 218E P/E of 13.x is compelling, suggest high earnings recovery, amid trading below to sector median. On a 218E earnings level, the stock offers discount of 3% to sector P/E amid a comeback, posting strong results, which came higher than our expectations in 2Q217. We believe with specialty product exposure and its diversification, Sipchem has one of the best risk-reward proposition at volatile times. Table 7: KSA Petrochemicals Sector Valuation (TTM basis) Company Name Price (SAR) Mcap SAR mln EV SAR mln P/E P/B P/S EV/ Sales EV/ EBITDA Div. Yld YTD 52 Wk-Hi 52 Wk- Lo Saudi Basic Industries Corp ,61 347, x 1.9x 2.2x 2.5x 7.9x 4. 1% Saudi Arabian Fertilizer Co ,25 24, x 3.7x 8.5x 8.7x 17.3x 2.5 (19%) National Industrialization Co ,455 28,4 26.7x 1.4x.8x 2.1x 1.1x NM (1%) National Petrochemical Co ,626 19, x 1.4x 1.4x 3.2x 11.2x 2.8x (15%) Saudi Industrial Investment Group ,522 23, x 1.5x 1.5x 3.7x 13.x 2.4x 12% Sahara Petrochemical Co ,77 5, x 1.2x 6.4x 5.6x 16.8x 5.4 (6%) Yanbu National Petrochemical Co ,294 31, x 2.2x 5.x 4.5x 8.9x 5.1 1% Saudi International Petrochemi ,764 12,965 4.x 1.1x 1.6x 3.3x 9.6x NM (17%) Advanced Petrochemical Co ,25 9, x 3.2x 4.x 4.3x 11.1x 6.1 (%) Saudi Kayan Petrochemical Co ,62 36, x 1.x 1.4x 3.7x 8.8x NM 3% Rabigh Refining & Petrochemical Co ,133 51, x 1.4x.4x 1.7x 18.5x NM 18% Alujain Corp ,526 2, x 1.3x 1.x 1.8x 5.x % Methanol Chemicals Co ,627 NM.8x 1.4x 2.5x 13.6x NM - (11%) Sector Median* 439, , x 1.4x 1.5x 3.3x 11.1x 4.9 *Market Cap and EV are total Data updated as of Sep 21, 217 Page 15 of 2

16 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Sipchem is approaching a mid-cycle A 12-month forward rolling band chart suggests Sipchem EV/EBITDA is in the last leg of its band at 6.7x, average being 7.2x. It always traded above 1.x during bull cycle when oil prices averaged USD 1/bbl. Exhibit 31: 12-Month Rollng EV/ EBITDA band Chart Enterprise Value (SAR Bln) 6x EBITDA 8x EBITDA 1x EBITDA 12x EBITDA 14x EBITDA, Riyad Capital Page 16 of 2

17 Summary Financials Table 8: Detailed Financials and Forecasts Income Statement (SAR mln) E 218 E 219 E Income Statement (SAR mln) Revenue 3,324 3,922 4,6 4,75 3,515 3,367 4,185 4,64 4,9 Cost of Sales (1,898) (2,654) (2,77) (2,732) (2,682) (2,677) (3,55) (3,248) (3,381) Gross Profit 1,427 1,268 1,299 1, ,13 1,392 1,519 S,G&A Expenses (125) (131) (137) (172) (26) (274) (377) (441) (478) Operating Profit 1,32 1,137 1,162 1, ,41 Investment Income Financial Charges (181) (183) (171) (156) (174) (277) (269) (261) (253) Others (1) 14 (22) (74) (4) Net Income before MI& Zakat 1, Zakat and MI (426) (386) (365) (333) (81) (117) (218) (296) (336) Net Income EBITDA 1,768 1,651 1,71 1,742 1,264 1,165 1,539 1,776 1,97 EPS DPS Balance Sheet (SAR mln) Assets Cash & equivalents 3,63 3,53 2,854 2,459 2,125 1,816 1,625 1,997 2,311 Inventories ,78 1,138 Accounts Receivable ,332 1, ,31 Total Current Assets 4,599 4,189 4,493 4,63 3,575 3,37 3,478 4,52 4,481 Property Plant & Equipment 9,88 1,649 11,555 12,884 13,294 13,31 12,751 12,368 11,997 Intangible Assets Other non current assets Total non-current Assets 1,66 11, 12,241 13,148 13,484 13,193 12,917 12,538 12,171 Total Assets 14,665 15,189 16,734 17,211 17,59 16,5 16,395 16,59 16,652 Liabilities & Equity Current Portion of LT Debt ,53 1, Account Payable ,39 1,116 Current Portion of Cap Lease Total Current Liabilities 1,317 1,389 1,49 1,565 1,79 2,91 2,179 2,246 2,27 Long Term Debt 3,563 3,977 5,218 5,387 5,488 5,69 5,329 5,62 4,89 Capital Lease Total non-current Liab 6,326 6,665 7,816 7,683 7,565 6,91 6,652 6,41 6,184 Total Liabilities 7,643 8,54 9,36 9,248 9,354 9, 8,831 8,657 8,454 Share Capital 3,667 3,667 3,667 3,667 3,667 3,667 3,667 3,667 3,667 Total Equity & Min. Interest 7,22 7,135 7,428 7,963 7,75 7,5 7,564 7,933 8,198 Total Liab & Equity 14,665 15,189 16,734 17,211 17,59 16,5 16,395 16,59 16,652 Cash Flows (SAR mln) CFO 1,765 1,314 1,32 1, ,63 1,25 CFI (995) (1,447) (1,787) (1,496) (1,27) (812) (721) (948) (976) CFF 1,163 (445) 555 (57) (234) (426) (743) (729) (715) Source: Company reports, Riyad Capital Page 17 of 2

18 Valuations and Ratio s Table 9: Detailed Ratios and Valuation E 218 E 219 E Valuation P/E 8.2x 9.6x 9.3x 9.3x 2.x 82.3x 18.3x 13.x 11.4x P/B 1.x 1.x 1.x 1.x 1.x 1.x 1.x.9x.9x P/S 1.7x 1.5x 1.4x 1.4x 1.6x 1.7x 1.4x 1.2x 1.2x P/CF 3.3x 4.4x 5.6x 3.4x 6.2x 6.2x 6.x 5.4x 4.8x EV/Sales 3.9x 3.3x 3.2x 3.2x 3.7x 3.9x 3.1x 2.8x 2.6x EV/EBITDA 7.3x 7.9x 7.6x 7.4x 1.3x 11.1x 8.4x 7.3x 6.8x EV/EBIT 1.x 11.4x 11.2x 11.1x 22.6x 31.1x 17.2x 13.6x 12.5x Dividend Yield 8.% 8.% 8.% 8.% 3.2% 3.2% 3.2% 4.8% 6.4% Growth (YoY) Total Sales 67% 18% 2% 2% -14% -4% 24% 11% 6% Gross Profit 66% -11% 2% 3% -38% -17% 64% 23% 9% EBITDA 65% -7% 3% 2% -27% -8% 32% 15% 7% Net Income 87% -15% 3% -1% -53% -76% 349% 41% 13% Margins Total Gross 43% 32% 32% 33% 24% 21% 27% 3% 31% Total EBITDA 53% 42% 42% 43% 36% 35% 37% 38% 39% Total Net Margins 21% 15% 15% 15% 8% 2% 8% 1% 1% Credit Ratio's Interest Cover Net Debt to EBITDA Cashflow/EBITDA 1% 8% 61% 96% 73% 8% 62% 6% 63% Debt to Assets 43% 45% 48% 46% 49% 48% 47% 44% 42% Debt to Equity Working Capital Ratio's Cash Ratio Current Ratio Receivables Turnover Inventory Turnover Payables Turnover Receivable Days Inventory days Payable days Cash Cycle Return Ratio's ROA 1% 8% 7% 7% 3% 2% 5% 6% 6% ROE 11% 8% 9% 8% 4% 1% 4% 6% 6% ROIC 12% 1% 9% 8% 4% 3% 5% 7% 7% Payout Ratio 65% 76% 74% 74% 64% 262% 58% 62% 73% Reinvestment Ratio's Capex/Sales 27% 36% 4% 35% 29% 25% 22% 2% 2% Capex/Depreciation 19% 271% 31% 253% 148% 114% 117% 115% 112% Key Per Share Ratio's EPS BVPS DPS Source: Company reports, Riyad Capital Page 18 of 2

19 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Appendix Exhibit 32: 5 Year Price Multiples Trading History P/B Ratio P/S Ratio.4.5 P/B 3 Yr Avg 12M Avg P/S 3 Yr Avg 12M Avg Share Price EV/EBITDA Ratio EV/EBITDA 3 Yr Avg 12-M Avg 9. Dividend Yield 6. EV/Sales Ratio Dvd Yld 12M Avg EV/Sales 3 Yr Avg 12M Avg 6 Volume Traded ( Mln Shares) 25 Value Traded (SAR Mln) Volume (Mln Shares) Turnover (SAR Mln) Page 19 of 2

20 Stock Rating Buy Neutral Sell Not Rated Expected Total Return Greater than 15% Expected Total Return between -15% and +15% Expected Total Return less than -15% Under Review/ Restricted * The expected percentage returns are indicative, stock recommendations also incorporate relevant qualitative factors For any feedback on our reports, please contact research@riyadcapital.com Disclaimer The information in this report was compiled in good faith from various public sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable. Riyad Capital makes no representations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad Capital does not represent that the information in this report is complete or free from any error. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this report. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents, and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof. Riyad Capital or its employees or any of its affiliates or clients may have a financial interest in securities or other assets referred to in this report. Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment as at the date of this report only and are therefore subject to change without notice. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections which represent only one possible outcome. Further, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified and future actual results or events could differ materially. The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may receive back less than originally invested amount. This report provides information of a general nature and does not address the circumstances, objectives, and risk tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does not take into account the reader s financial situation or any specific investment objectives or particular needs which the reader may have. Before making an investment decision the reader should seek advice from an independent financial, legal, tax and/or other required advisers due to the investment in such kind of securities may not be suitable for all recipients. This research report might not be reproduced, nor distributed in whole or in part, and all information, opinions, forecasts and projections contained in it are protected by the copyright rules and regulations. Riyad Capital is a Saudi limited liability company, with commercial registration number ( ), licensed and organized by the Capital Market Authority under License No. (77-37), and having its registered office at Al Takhassusi Street, Prestige Building, Riyadh, Kingdom of Saudi Arabia ( KSA ). Website: Page 2 of 2