Itqan Cap maintains ‘Neutral’ rating on Herfy, says recovery to be slow

Itqan Capital maintained “Neutral” recommendation on Herfy Food Services Co., while reducing the target price (TP) for its shares to SAR 51.30 from SAR 51.83 per share.

Herfy was able to significantly recover in Q3 2020 compared to the previous quarter, in line with expectations, as COVID-19 restrictions eased, allowing reopening of commercial centers, Itqan Capital said in a recent report.

Going forward, recovery is expected to be slow with high pressure on yield-per-store due to heavy reliance on home delivery options, the report said, adding that the company sales are still impacted with the current market conditions of the COVID-19 pandemic.

“The company’s yield-per-store is expected to be at its lowest levels until the end of 2021,” the report said.

Herfy is not expected to announce any dividend until the end of financial year 2020, it said, adding that the company is not expected to return to pre-pandemic levels until 2022, yet it will maintain its competitiveness due to the implementation of home delivery option.

Itqan Capital expects Herfy to achieve a net profit of SAR 65 million in 2020, a value of SAR 140 million in 2021, and SAR 178 million in 2022.