Herfy Food Services Co.’s net profit of SAR 47.7 million in Q1 2018 came in line with Albilad Capital's estimates of SAR 47 million and analysts’ consensus of SAR 47.3 million, the brokerage said in a recent note.
Herfy’s first-quarter profit declined 9 percent year-on-year (YoY), attributed to a SAR 19 million increase in cost of goods sold, which more than offset the increase in top line (SAR 11 million).
Operating income (EBIT) hit SAR 52 million in Q1 2018, down 7 percent YoY and 1 percent quarter-on-quarter (QoQ). Thus, operating profit margin shrank to 18 percent, versus 20 percent in Q1 2017.
The fast food chain opened seven new branches by the end of Q1 2018, boosting the number of restaurants to 355 branches.
It plans to open 25 restaurants in 2018, the same as the previous year (excluding closures), according to Albilad Capital.
"In general, the company's overall performance in 2018 is expected to be crimped by lower consumer purchasing power and higher cost levels, thus lower profitability margins, coupled with increased competition in the market," the investment arm of Albilad Bank noted.
Albilad Capital recommended a "Neutral" on Herfy and set the stock's target price at SAR 52, factoring in the first-quarter KPIs which were in line with estimates.
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