United Electronics Co. (eXtra) reported a net profit of SAR 30.9 million in Q3 2018 - its highest net income on record - beating NCB Capital and consensus’ estimates of SAR 22.9 million and SAR 26.5 million, respectively.
Q3 revenue came ahead of NCB Capital’s forecast of SAR 794 million, jumping 15 percent year-on-year (YoY) to SAR 895 million – the highest since inception.
“We believe the positive variance is mainly due to the strong like-for-like (LFL) growth, earlier launch of iPhones and opex efficiencies,” the brokerage firm said in an earnings review.
Gross margins remained broadly flat at 19.2 percent in Q3, compared to the brokerage’s estimate of 19.8 percent. The lower-than-expected margins are attributed to the early launch of the iPhone, which led to higher sales in the low-margin electronics segment.
Operating expenses increased 13.1 percent YoY to SAR 138 million, above NCB Capital’s forecast of SAR 130 million.
NCB Capital maintained a “neutral” rating on eXtra with a target price of SAR 56.0.
The LFL growth driven by industry consolidation is positive for the home appliance retailer. Meanwhile, concerns include the gradual impact of expat departure and higher financing expenses, the report added.
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