Fawaz Abdulaziz Alhokair Co.’s (Alhokair) results for the second quarter this year are expected to benefit from the increased government spending now that the bonuses and incentives of state employees have been reinstated since April, NCB Capital said in a preview.
Sales for Alhokair in the Kingdom, which represents 83 percent of its sales, are likely to increase at a compound annual growth rate (CAGR) of 5.1 percent, versus previous estimates of 2.6 percent, the report said.
However, the closure of 368 showrooms last year is expected to hit revenue, although this would improve margins.
Revenue is projected to rise by 2.6 percent on an annual basis to SAR 6.9 billion in 2018, supported by the introduction of new brands.
“We expect revenue to increase at a CAGR of 4.6 percent till 2021, compared to 9.5 percent since 2013,” the brokerage said.
Alhokair’s revenue from its international business, which represents 17 percent of total revenue, declined 5.8 percent in 2017 to SAR 1.1 billion, due to the closure of a number of showrooms abroad.
NCB Capital has maintained its “Neutral” rating on the stock with a revised target price to SAR 42.2 per share from SAR 45.2 per share.
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