eXtra's Q4 broadly in-line with estimates, says NCBC

United Electronics Co. (eXtra) reported a net income of SAR 62.9 million for Q4 2018, broadly in-line with NCB Capital and consensus estimates of SAR 66.7 million and SAR 66 million, the brokerage said in a note on Sunday.

"We believe the year-on-year (YoY) growth is driven mainly by gross margin expansion given higher contribution of higher margin home appliances in the product mix, lower financing expenses and lower Zakat provision," it added.

The company's sales reached SAR1.62 billion, supported by the mega-sale in November, missing NBC's estimates of SAR 1.67 billion. LFL growth stood at 2.7 percent YoY in Q4 2018, supported by consolidation trends in large home appliances.

"We believe the limited top-line growth came as a result of pre-VAT buying in Q4 2017 and early launch of the iPhone in Q3 2018, which added four percent to the Q3 2018 LFL growth levels," the report said.

Gross margins expanded to 16.5 percent, beating NCB's estimate of 16 percent. However, Opex stood at SAR 200 million, broadly in-line with the estimates of SAR 194 million.

NCB Capital recommended a “neutral” on eXtra with a target price of SAR 59.7.   

"We believe the market share gains as a result of the consolidation in the industry is a positive. Moreover, we expect eXtra's plan to return to store expansion will further support top-line growth in 2019," the brokerage stated.