SACO Q4 2020 results beat estimates; 2021 profit forecasted at SAR 91.1 mln: AlJazira Cap

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Saudi Company for Hardware’s (SACO) Q4 2020 net profit of SAR 24.2 million exceeded AlJazira Capital's estimate of SAR 20.3 million.

The brokerage firm said in a recent report that the profit growth was driven by higher gross profit margin and lower operating expense (OPEX).

"We believe that cost-efficiency initiatives and rent negotiations with landlords were instrumental in the increase in gross profit margin," it noted.

SACO is expected to benefit from the stellar increase in mortgage loans, as demand for home improvement will follow the rise in mortgage loans.

"We expect a year-on-year (YoY) increase in Q1 2021 net profit, driven by cost cutting initiatives taken by the company to boost the gross profit margin and lower net income base for Q1 2020,"AlJazira Capital said.

It added that SACO has the potential to benefit from growth opportunities through store expansion, introduction of new product categories, new distribution center, and increased online sales, all of which could lead to higher market share.

The Tadawul-listed firm is forecast to post a net profit of SAR 91.1 million for 2021 (SAR 2.53 per share), a rise of 6.6% YoY.

AlJazira Capital revised its recommendation to ‘Neutral’ and maintained its target price (TP) at SAR 57.10 per share, as the upside from current levels seems limited.