Aldrees’ Q2 2020 earnings exceed expectations: Itqan Cap

Aldrees Petroleum and transport Services achieved better results than expected in the second quarter of 2020 due to lower costs, higher than expected quantities and stations expansion in the petroleum segment, Itqan Capital said in an earnings review.

Itqan expects Aldrees to continue its expansion in the petroleum segment in the coming years as it seeks to take advantage of the new profit margins. On the other hand, it will make the Saudi market more attractive for GCC competitors which are likely to seek more aggressive expansion in the Kingdom than previously planned.

Petroleum sales are expected to normalize following the end of lockdown restrictions, yet average quantity sold per station is likely to remain lower than previous year due to lower economic activity (impacting diesel sales) and continued working from home for some private sector employees.

The brokerage firm expects the company’s net profit to reach SAR 83 million in the fiscal year 2020, and SAR 175 million in 2021.

Aldrees would have recorded losses of almost SAR 40 million during the second quarter had IFRS16 amendments not been applied, which supported the bottom line to fall only by 16.4% year-on-year (YoY).

Itqan Capital revised the target price to SAR 73.5 per share for Aldrees, and also upgraded its rating on the stock to “Overweight”.

By upgrading the rating, Itqan Cap means that there is an upside potential of more than 10% in 52-week period.