Al Othaim Markets Q4 2020 earnings above expectation, maintain rating at ‘Overweight’: Al Rajhi Cap

Abdullah Al Othaim Markets Co.’s Q4 2020 net profit of SAR 165 million beat Al Rajhi Capital and consensus estimates of SAR 95 million and SAR 119 million, respectively, the research firm said in an earnings review.

The main reason for the higher-than-expected profits was a positive surprise on gross margins, which expanded due to higher rebate from suppliers. The revenue dropped 3% year-on-year (YoY) in Q4 2020 likely due to the delay in re-opening of schools and expat exodus, the report said.

The market share of modern trade is increasing as the industry is consolidating and Al Othaim Markets is expanding to tap this opportunity. This, in turn, would help the company to expand its market share and will lead to a strong revenue growth in the near future.

“Therefore, Al Othaim Markets remains our top-pick in consumer staples segment due to its strong return metrics, strong balance sheet and aggressive expansion plans,” the report said.

Al Rajhi Capital rated the stock “Overweight”, with a target price (TP) of SAR 140 per share.

An "Overweight" rating, according to Al Rajhi Capital, implies the TP is more than 10% above the current share price, with the expectation that the share price will reach the target within a 12 month time horizon.