Saudi Fransi Capital predicts that the consumer sector’s combined net profit could rise 10 percent to 1.85 billion in the third quarter, excluding Savola Group and Extra, which are predicted to post a double-digit decline in earnings.
“Performance is likely to be divergent across sectors and companies,” the brokerage arm of Saudi Fransi Banque said in a research note.
The firm forecast that consumer staples— excluding Savola— could register a 12 percent year-on-year (YOY) growth and retail, with the exception of Extra, to report 7 percent YOY earnings growth.
Travel and tourism and healthcare sectors should see their Q3-15 earnings growing 12 percent YOY each.
“At the company level, while performance is likely to be mixed, we expect Care (+27 percent YOY), Sadafco (+25 percent YOY), Nadec (+18 percent YOY), Al Tayyar (+17percent YOY) and Farm (+12 percent YOY) to stand out,” according to the research note. “Extra (-36 percent YOY) and Savola (-27 percent YOY) could be laggards.”
All 15 consumer stocks under Saudi Fransi’s coverage dropped in the third quarter of 2015, though at various levels. Food and Agriculture firms dropped 13 percent quarter-on-quarter, but outperformed Tadawul, which dropped 18 percent. Retailers underperformed the Saudi index, declining 23 percent.
Excluding healthcare, the Saudi consumer sector is trading at a discount.
“Consumer sector is an earnings growth play coupled with resilience during broader market corrections and subsequent recoveries as witnessed over market cycles,” the firm added.
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Ratings and Target Prices |
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|
Upside |
Target price |
Price |
Rating |
Company |
|
21% |
102.0 |
84.5 |
Buy |
Almarai |
|
46% |
86.0 |
59.0 |
Buy |
Savola |
|
24% |
36.0 |
29.0 |
Hold |
Nadec |
|
(7%) |
130.0 |
139.5 |
Hold |
Sadafco |
|
52% |
140.0 |
92.1 |
Buy |
Herfy |
|
43% |
255.0 |
178.0 |
Buy |
Jarir |
|
46% |
135.0 |
92.8 |
Buy |
Othaim |
|
11% |
76.0 |
68.2 |
Buy |
Farm Superstores |
|
81% |
128.0 |
70.6 |
Buy |
Al Hokair |
|
-- |
UR |
4.9 |
Under review |
eXtra |
|
73% |
236.0 |
136.6 |
Buy |
Catering |
|
71% |
135.0 |
79.0 |
Buy |
Al Tayyar |
|
35% |
165.0 |
121.9 |
Buy |
Mouwasat |
|
-- |
UR |
99.8 |
Under review |
Dallah |
|
29% |
71.0 |
55.2 |
Buy |
Care |
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