Revenue – SAR529mn, +22% Y-o-Y, +25% Q-o-Q, +16% vs. EFGe Gross Profit – SAR146mn, +25% Y-o-Y, +6% Q-o-Q, +6% vs. EFGe Operating Income – SAR96mn, +51% Y-o-Y, -0.2% Q-o-Q, +16% vs. EFGe Net Income – SAR160mn, versus loss of SAR48mn in 4Q15, +52% Q-o-Q, +46% vs. EFGe   Sahara Petrochemicals announced stellar 4Q16 results that saw earnings surge 52% Q-o-Q and significantly beat both our (+46%) and Bloomberg consensus forecasts (+65% ex-EFG). The main driver of the improved earnings Q-o-Q was a significant improvement in income from JV investments and other income, which surged 80% Q-o-Q to SAR122mn. The company does not breakdown income from JV investments + other income in its financial highlights, so it is not yet clear which of these was the main contributor to the strong earnings (our forecasts assumed a 42% improvement in income from JV investments and flattish other income Q-o-Q). Note that the company’s JV investments include: SEPC (24%-owned), SAAC (43%-owned) and SAMAPCO, 50%-owned.   SEPC should have benefitted from higher LDPE prices (+8% Q-o-Q), although this was likely partially offset by higher feedstock propane prices (+28% Q-o-Q). SAAC should have seen much better earnings (our forecasts assumed the company generated a profit this quarter) on the back of a surge in acrylate prices (+15-20% Q-o-Q). Finally, SAMAPCO likely saw better earnings Q-o-Q on the back of the jump in caustic soda prices (+25%).   On the operational level – which only consolidates the company’s 75%-owned Al Waha project – revenues skyrocketed by 25% Q-o-Q on the back of higher sales volume, according to the release and were significantly ahead of our forecast (+16%) likely due to much higher volumes as we had only assumed a 5% improvement in production this quarter. Based on these revenue figures, our estimates would imply  that the plant was operating at 115-120%, much higher than the full rates seen in 3Q16. Gross profit was only slightly higher Q-o-Q (+6%) as the higher sales volume was largely offset by lower margins (27.6% vs 32.4% in 3Q16 and EFGe of 30.1%) due to a decline in the PP-propane spread.   Overall,  a very strong performance from Sahara with the stock now posting four consecutive quarters of improved earnings. We expect the stock is likely to react positively on the news in trading today given that the results were much stronger than market expectations, but we caution investors that we still don’t know how much of this performance was driven by the company’s operational assets and how much came from other income (which could have included one-offs). If the strong performance was mainly driven by income from JV investments, then this would imply that the stock would offer an attractive entry point as the annualised 4Q earnings would imply a P/E multiple of c9.5-10x, and furthermore, acrylate and caustic soda prices have continued to rally in the new year, which could drive further earning gains this year. We will review our forecasts and rating once full financials are available, but for now, we think upside risks on the stock outweigh downside risks, especially as we believe the management could boost dividends again this year given how much earnings have improved and given the strength of its balance sheet. (Company disclosure, Yousef Husseini)   Sahara Petrochemicals: SAR13.76 as of 18 January 2017, Rating: Neutral, TP: SAR10.50 per share, MCap: USD1,610mn, SPC AB / 2260.SE