Aljazira Capital has maintained an “overweight” rating on Al-Jouf Agriculture, with a lower target price of SAR 33.80 a share; indicating potential upside of 33 percent over the current market price of SAR 25.40 a share.
Second half of 2016 earnings are expected to witness higher impact of reduction in energy subsidies, the brokerage firm said in a research note.
Q3’s net income came 19.9 percent below Aljazira Capital’s expectations.
“We believe that the YoY weak profitability is mainly attributed to i) A drop in sales ii) higher production cost after increase in fuel cost iii) SAR 5.8 million increase in selling & distribution expenses due to carrying the cost of crops delivery,” analysts wrote in the report.
The company is expected to post SAR 98.1 million in net income for 2016, recording an increase of 7.7 percent YoY despite the impact of the increase in energy and water prices, according to Aljazira Capital.
Aljazira expects the company to maintain its dividend payment at SAR 1.0 DPS (3.4 percent D/Y) in 2016.
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