Savola Group’s net profit of SAR 829 million in Q3 2017 was higher than the NCB Capital (NCBC) and consensus estimates of SAR 582 million and SAR 756 million, respectively, the brokerage said in an earnings review.
Adjusting the one-off capital gain of SAR 694 million from the sale of its 2 percent stake in Almarai Co., Savola’s adjusted net income decreased 26.1 percent year-on-year (YoY) to SAR 135 million versus the NCBC estimates of a loss of SAR 112 million.
“We believe the higher-than-expected earnings came mainly as a result of lower-than-expected opex (operating expenses) and financial charges,” NCBC said.
Savola’s sales declined 8.1 percent YoY to SAR 5.7 billion, due to the weakness in Panda sales, coming in-line with estimates.
Gross margins, which contracted 80 basis points YoY to 18.3 percent, were broadly in-line with NCBC estimates of 19.1 percent.
NCB Capital recommended an “overweight” on Savola with a target price of SAR 47. “The continuous weakness in retail sales and margins is a cause of concern,” the brokerage added.
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