Budget Saudi’s Q4 2020 net profit above estimates: Aljazira Cap

Budget Saudi office

United International Transportation Co.’s (Budget Saudi) Q4 2020 net profit of SAR 79.4 million is above AlJazira Capital’s estimates of SAR 37.3 million, the brokerage firm said in an earnings review.

The deviation from estimated net income was due to higher-than-expected revenue, supported by increase in profit from vehicle sales, and improvement in gross profit margin and operating profit margin.

AlJazira Capital expects the short-term rental recovery to continue in the coming quarters, while some pressures related to the COVID-19 pandemic are likely to continue in light of renewed restrictions. Similarly, it forecasts strong performance of the long-term rental business to continue.

Vehicle sales are not expected to continue to be as high as in Q4 2020 and are likely to shrink in coming quarters, the report said.

The improvement in fleet operating rates will raise Budget Saudi’s efficiency rates, thus expanding the margins in its core business, despite expectations of some pressure on 2021 revenues.

Aljazira Capital maintained its “Neutral” recommendation on the stock with a target price of SAR 34.30 per share.

Neutral rating implies that the stock is trading in the proximate range of its 12 months price target. Stocks, and is expected to stagnate within +/- 10% range from the current price levels over next 12 months, according to Aljazira Capital.