Itqan Capital says SADAFCO maintained growth momentum, raises TP to SAR 178.3

Saudia Dairy and Foodstuff Co. (SADAFCO) maintained growth momentum, despite the tripling of the value-added tax (VAT) in the second quarter ended Sept. 30, 2020, Itqan Capital said in a report.

However, the company maintained its expansion plans, albeit at a slower pace, which will support the company in the longer term.

During the period, SADAFCO was able to maintain its market share where UHT milk was at 62.7%, tomato paste at 50.3%, and ice-cream at 25.7% due to new ice-cream assortment, the brokerage said, adding the ice-cream market share is expected to increase in the second half 2021.

The easing of the COVID-19 restrictions significantly supported the company despite the VAT increase in the quarter. It is expected that the impact of the Kingdom’s austerity measures will affect the company by H2 2021, as it will have a direct impact on the consumer’s welfare. However, the defensive nature of SADAFCO’s is expected to slightly offset the impact of the shrinking in the consumers’ shopping basket.

Itqan Capital maintained a “neutral” recommendation, as it raised the target price to SAR 178.3 from SAR 157.5 per share.