The earnings beat came due to higher-than-expected improvement in overall margins and a rise pharmaceutical revenue to total revenue, the brokerage said in an earnings review on Thursday.
"Going forward, we expect the gradual improvement of Nuzha Hospital utilization and pharmaceutical segment to continue driving the revenue growth but with low pace in the coming two quarters due to seasonality," Al Rajhi Capital added.
"Additionally, we believe that expat exodus has bottomed-out and will not have a material impact on the number of patients going forward," it noted.
Al Hammadi’s exposure to the government contracts is still high, which has kept receivables (97 percent of receivables are from the Ministry of Health) at an elevated level, leading the company to raise an additional debt for its liquidity needs.
Total receivable stood at SAR 586 million by the end of Q1 2019, raising the concerns about the efficiency of its shift towards government contracts.
In light of limited cash and cash equivalents, Al Hammadi might have to issue more debt to fund its working capital requirements in future.
The brokerage firm added that its key concerns remain the government receivables and the liquidity position.
Al Rajhi Capital maintained its "neutral" rating on the stock and its target price to SAR 25.