Saudi Arabia - Aldrees Petroleum and Transport Services Company, a Saudi petroleum retailing and logistics firm, has posted a second-quarter (Q2) net profit of SR46 million ($12.24 million), a 26% drop compared to the corresponding quarter last year.
The company reported Q2 top-line at SR2,988 million (largely in line with Al Rajhi’s estimate), up by 7.5% q-o-q, mainly driven by a gain in the Petroleum division revenues, offsetting weak revenues of the Transport division, according to Al Rajhi Capital Research.
The Petroleum segment revenues (98% of total) rose 8% q-o-q, mainly driven by the increased number of stations and thereby higher fuel sales volume amid flat fuel prices. However, the Transport segment’s revenues declined 7% q-o-q%, largely impacted by the reduction in sales of Saudi grains amid the Ukraine crisis, and overall slower activity due to the Ramadan season in Q2.
Despite a healthy top-line, gross and operating profits remained mostly flat, slightly below Al Rajhi’s estimates. Accordingly, the corresponding margins came in 20-30bps lower than the expectations, which could be attributable to product mix change (the Transport division has higher gross margins while the Petroleum division’s margin remains mostly fixed at the gross level).
Further, the company incurred SR6.3 million losses from an investment against SR7.8 million gains on investment last quarter.
Going forward, Al Rajhi remains positive on the company, mainly due to its aggressive expansion plans (100 new stations annually; target to reach 1,000 stations by 2025); growing market shares (6.98% in Q2 2022 vs 5.68% in Q2 2021) amid relatively lower penetration (13.7% as of Q2 2022) of the organised segment in fuel station; and ability to pass on the higher diesel prices. However, Al Rajhi sees a couple of headwinds for the company in the form of likely weak performance of the Transport division amid lower incoming ships due to the ongoing Russia-Ukraine conflict, losses of investment, and rising G&A expenses amid the Saudisation pressure.
Post Q2 earnings miss, Al Rajhi revises its target price to SR85.0/sh. (SR90.0 earlier) but remains Overweight on the stock.
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