Itqan Cap recommends “Neutral” rating for Al Othaim with TP of SAR 107

Itqan Capital initiated the coverage of Abdullah Al Othaim Markets Co. with a “Neutral” recommendation and a target price (TP) of SAR 107.

The brokerage firm said in a research note that the company showed an above-average performance in Q1 2020, adding that the coronavirus induced surge in demand, combined with the firm’s covered ground in terms of stores, led to a 21% year-on-year (YoY) increase in revenue.

Momentum is expected to persist towards the end of the year, Itqan noted.

“Due to company’s primary operations in food retail and wholesale, the demand is expected to remain high towards the end of the year. Moreover we expect an exceptionally strong Q2 on the back of application of value-added tax (VAT) in the beginning of Q3,” the brokerage firm said.

Itqan further said that going forward, Al-Othaim could face intense competition through e-commerce retailers due to the growing consumer shift towards online shopping amid the pandemic outbreak.

“We believe that the only way for the company to maintain market share is through heavily investing in an online platform rather than physical expansion,” it added.