SABIC: Deep Dive

The short version

In my view SABIC is the stock many Saudi investors own without thinking much about it. It is the country's chemicals champion, 70% owned by Aramco, with a dividend paid every year since at least 2010. At SAR 47.08 it trades at 1.10x book and yields 5.5% on trailing dividends. That looks cheap.

I do not think it is cheap. I think it is a business in the middle of a long, hard reset, priced as if the reset is nearly done.

Four facts frame the story:

• Margins stepped down and stayed down. EBITDA margin was about 30% from 2015 to 2018. It was 13-18% from 2023 to 2025. Return on invested capital has been under 5% for three years (1.7-4.6%), below any cost of capital.

• The group is smaller. The disposals took out about a quarter of revenue. Hadeed (steel), European Petrochemicals and the Americas and Europe engineering plastics business are gone or going. Discontinued operations lost SAR 32bn over 2023-2025. Book value fell from SAR 186bn to about SAR 124bn.

• Fertiliser carries the profit, and SABIC owns half of it. In 2025 Agri-Nutrients made 92% of group EBIT. SABIC owns 50.1% of that listed company. Petrochemicals, 89% of revenue, earned an EBIT margin of 0.3%.

• The dividend is not covered by cash. Free cash flow less all dividends was negative SAR 2.8bn, 6.6bn and 5.8bn in 2023, 2024 and 2025. Net cash of SAR 13.9bn at end-2022 became net debt of SAR 3.0bn at September 2026. The first-half 2026 dividend was cut to SAR 1.10 from SAR 1.50.

Key numbers (29 Oct 2026 close, SAR 47.08)

• Market cap SAR 141bn. 3,000m shares.

• Price to book 1.10x on end-2025 equity. Trailing yield 5.5%.

• 9M-26 revenue SAR 79.1bn. Net loss to shareholders SAR 0.3bn.

• Model value per share: Base SAR 30.3, Upside 53.0, Downside 10.8. Probability-weighted SAR 31.1, about 34% below the price.

To justify today's price on my base-case cash flows, my model needs a long-run EBITDA margin of about 25.7%. The base case gives 19%, and the 2021-2025 average was 18.6%. A 25.7% margin would mean a return to the pre-2019 world.

The upside case is the one that justifies the price. On upside cash flows the price needs a margin of about 20.2%, and the upside delivers 22.4%. So the price sits between my base and upside cases, and it is paying for the upside.

That world had cheap ethane, a quiet China and a group that owned steel and European plastics. None of those three is coming back. A new CEO from Aramco took over in April 2026. He inherits a cleaner portfolio, a lower dividend and a cycle in which S&P Global analysts think Asian olefin margins may not turn positive before 2030.

My view: the stock is priced for a recovery that the evidence does not yet support. The edge is to stop reading SABIC as a dividend stock and start reading it as a cyclical whose balance sheet is getting weaker.