SICO starts SACO's coverage with 'buy' rating, TP at SAR 131

SICO Investment Bank has initiated coverage on Saudi Company for Hardware (SACO) with a “buy” rating, setting the stock’s target price at SAR 131, the brokerage said on Thursday.

SACO's revenue and net profit are likely to be driven by the company's plans to increase its retail space by 33 percent over the period between fiscal years 2018 and 2020.

In addition, SACO's new electronics line can be a catalyst for driving like-for-like sales and market share growth.

"We estimate SACO’s top line and bottom line to grow at a CAGR of 11 percent over FY17-20," SICO added.

The hardware retailer could also be a player on housing projects and broader revival in the construction sector across the Kingdom, SICO added.

Meanwhile, SACO is likely to capitalize on the expected consolidation among unorganized firms in the market.

SACO's market share is projected to climb from almost 5 percent currently.

"Saudisation in the home furniture & appliances stores by September 2018 and for other 10 categories in the next 3-4 months.

Accordingly, we expect consolidation and higher market share to be more apparent from 1H19," the brokerage firm said.