Saudi Al Rajhi Capital sets TP of Almarai at $13.6/share

Almarai is seen to record lower earnings in the second half of 2020

  
Almarai dairy products Head Office is seen in Riyadh, Saudi Arabia July 12, 2018. Image used for illustrative purpose.

Almarai dairy products Head Office is seen in Riyadh, Saudi Arabia July 12, 2018. Image used for illustrative purpose.

REUTERS/Faisal Al Nasser

Riyadh – Al Rajhi Capital has set the target price (TP) of the Tadawul-listed Almarai Company at SAR 51 per share, with a ‘Neutral’ recommendation.

Almarai is seen to record lower earnings in the second half (H2) of 2020 when compared to H1-20, as the impulsive buying stops and consumer spending declines due to the recent hike in the value-added tax (VAT), according to the research firm’s report on Thursday.

“We expect Almarai to benefit from custom duty imposed on imported meat and some dairy products," Al Rajhi added.

In H1-20, Almarai gained SAR 643.9 million in net profits after Zakat and tax, up by 10.54% annually when compared to SAR 582.5 million, owing to a growth in revenues, led by the product categories of foods, long-life dairy, and poultry, which recorded annual double-digit growth.

The company's gross profit increased by 4.7% while selling and distribution expenses soared by SAR 47 million or 8%, and general and administrative expenses hiked by SAR 5.3 million or 5.3%.

“Any significant increase in dairy and poultry segment growth in coming months especially in food service might have a positive impact on the company’s top-line and will have positive upside risk to our valuation,” the report read.

Al Rajhi further added that the aforementioned valuation might be negatively affected if there is an increase in input costs and SG&A, and if consumer spending decreases more than the current estimates.

Source: Mubasher

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