Al Hokair’s Q4 profit tops forecast, says Al Rajhi Cap

24/04/2017 Argaam

Fawaz Abdulaziz Al Hokair Co. posted mixed results for the fourth quarter FY16/FY17 with SAR 79 million net profit, which topped Al Rajhi Capital’s estimate of SAR 61, due to lower financial charges, lower zakat, and likely higher other income.

 

Gross profit margin at 23.2 percent came well above estimates of 19 percent, while operating margin was exactly in line, Al Rajhi Capital said in an earnings review.

 

“We believe there is increased visibility of gross margins stabilizing at these levels and may witness further uptick as these initiatives mature in Saudi and international operations (especially US) achieve breakeven,” the brokerage firm added.

 

Al Hokair recorded lower inventory write-downs/ provisions, as the management has focused on better merchandizing, supply chain revamp, reorganizing brand portfolio, and lower discount windows.

 

The retailer will benefit from King Salman’s royal decree on reversing the allowance cut, which will boost consumers’ disposable income and discretionary retailers.

 

The restoring of these allowances will also mitigate any negative impact from limiting mall jobs for nationals, which could drive operating expenses.

 

Al Rajhi Capital added that it affirmed its “overweight” rating on the stock, upping its price target to SAR 38.60 from SAR 36.10.

 

Target price recommendations for Al Hokair in last 3 months

Firm

Recommendation

Target Price

Al Rajhi Capital

Overweight

38.60

NCBC

Neutral

37.70

Aljazira Capital

Neutral

34.00

Average Target Price

 

36.77

 

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