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Investing.com - Morgan Stanley downgraded Aldrees Petroleum & Transport (ALDREES:AB) from Overweight to Equalweight on Thursday, while slightly lowering its price target to SAR146.50 from SAR148.00.
The downgrade follows Aldrees ’ significant outperformance against the broader Saudi index, with the stock gaining approximately 23-24% since mid-September on expectations of government fuel margin increases.
Morgan Stanley noted that while a potential SAR0.1/liter increase in gasoline margins would boost Aldrees’ 2026 EBITDA by 6.5% and the firm’s DCF valuation by 14.5%, there are currently no indications of margin increases in the short term.
The research firm highlighted comments from Aldrees’ management during its recent earnings call, which indicated low visibility on both the timing and magnitude of any potential margin increases.
Morgan Stanley also suggested that higher margins could paradoxically hamper Aldrees’ network expansion efforts in the short term, potentially reducing the consolidation pressure currently faced by independent players due to regulations announced in December 2023.
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