Itqan Capital maintains “Neutral” recommendation for Almarai

Itqan Capital adjusted the target share price of Almarai Co. to SAR 49 and maintained its “Neutral” recommendation.

“Almarai’s gross profit remained under pressure in Q2 2020 on the back of COVID-19 related expenses coupled with alfalfa and labor expenses,” the brokerage firm said in a research note.

Despite the strong performance during the pandemic, which was mainly supported by the company’s diverse product range and strong channel base, Almarai is facing significant challenges in the longer term, the firm added.

Itqan Capital expects the combination of weak purchasing power due to tripling of value-added tax (VAT) and less population as expatriates leave the Kingdom, in addition to alfalfa expenses, Almarai could be heading towards a challenging period after the pandemic.

The company has no room for further long-term growth, the firm said, adding that in the short-term, the imposed import duty levy could be an opportunity as demand for locally produced poultry could increase.