Revenue – SAR449mn, +102% Y-o-Y, +7% Q-o-Q, +0% vs EFGe Gross Profit – SAR147mn, +862% Y-o-Y, +35% Q-o-Q, +7% vs EFGe Operating Income – SAR101mn, vs losses of SAR11 mn in 2Q16, +70% Q-o-Q, +8% vs EFGe Net Income – SAR96mn, +745% Y-o-Y, +77% Q-o-Q, +5% vs EFGe   Sahara Petrochemical Company (Sahara) has just announced its 2Q16 financial highlights with earnings coming in at SAR96mn, showing a massive improvement of 77% Q-o-Q. The positive results came broadly in-line with our expectation for earnings of SAR92 mn (+5%), but beat consensus estimates by a wide margin (+46%). Sahara attributed the improvement in quarterly results to i) higher sales volumes from Al Waha (75%-owned); ii) improved contributions from Tasnee & Sahara Olefins Company (TSOC, 32.6%-owned) on higher sales volumes and better pricing; iii) a decline in losses generated from Saudi Acrylic Acid Company (SAAC, 43.16%) on an improvement in prices as well as a positive impact from the commercial start-up of the butanol project and iv) improved prices and sales at Sahara and Maaden Petrochemical Company (SAMAPCO, 50%), with the company achieving the highest level of production in its history during the quarter.   Revenues of SAR449mn were up 7% Q-o-Q  (+102% Y-o-Y) and were in line with our forecast with the slight beat at the operational level stemming from the better-than-expected margins at Al Waha. Al Waha saw a significant improvement in margins on higher PP-propane spreads (+18% Q-o-Q), which drove the EBITDA margin to 35.4%, much higher than the 26.9% reported in 1Q16 and better than our 32.6% forecast. This is the fourth consecutive quarter of strong operations at Al Waha, marking the first time the company has managed to operate the plant with no issues for a full year.   Overall, Sahara's 2Q16 results reaffirms our tactical call on the stock as one of the companies in the chemical space that was likely to see a considerable improvement Q-o-Q but despite this, we think that 2Q16 will likely be the best quarter for the company in 2016 and that the share price today fairly reflects Sahara's fundamentals, thus we maintain our Neutral rating. (Yousef Husseini, Ahmed Hazem Maher, company)   Sahara Petrochemicals: SAR11.56 as of 21 July, Rating: Neutral, FV: SAR9.50 per share, MCap: USD1,353mn, SPC AB / 2260.SE