Itqan Capital initiates Herfy coverage with “Neutral” recommendation

Itqan Capital has started the coverage of Herfy Food Services Co. with a “Neutral” recommendation and a target price of SAR 54.70 per share.

The brokerage firm said in a research note that Herfy is the strongest local rival to McDonald’s in Saudi Arabia, with the geographical presence of 375 restaurants and the largest and most successful local fast-food brand.

“We project a positive outlook for Herfy, supported by the company’s increased penetration of online food delivery, cost advantages compared to its competitors and the expected rise in tourism in the Kingdom,” the note said.

“The company is also set to benefit from its impressive geographical expansion and a strong brand image in the Saudi market,” it further added.

The brokerage firm also noted that key growth catalysts for Herfy include an expected boost in tourism in Saudi Arabia, cost advantages compared to competitors, along with the introduction of Herfy app.

However, key risk factors affecting the company’s business include rise in marketing and selling expenses, and shift in consumer behavior towards healthier food.