Almarai reports strong performance in Q1 2020, says Itqan Capital

Almarai Co. reported strong top-line and bottom-line performance in Q1 2020, thanks to increased demand on food, long-life dairy, and poultry segments, Itqan Capital said in an earnings review.

The brokerage firm added that Almarai is strongly positioned to benefit from the current lockdown as eating from home increases, which is expected to reflect positively on modern and traditional trade sales channels.

The research firm however noted that the company is facing considerable risks arising from COVID-19, which is expected to be reflected in the food services sales channel (HORECA) sales.

Revenue from HORECA accounted for 13% of Almarai’s revenue and contributed around 23% to top-line growth in Q1 2020.

The brokerage firm expected revenue from HORECA to be slashed by more than 50% in Q2 2020 on the back of lower restaurants and hotels activity.

This is particularly set to impede the fast growth of the poultry segment, which generates almost half its revenue from the food services channel, it said, adding that juice segment’s revenues might also slowdown as consumers currently cut discretionary spending.

Itqan Capital maintained its ‘Neutral’ recommendation on Almarai, with a target price of SAR 46 per share.