eXtra’s profit driven by lower opex, strong sales: NCB Cap

United Electronics Co. (eXtra) first quarter 2017 net profit of SAR 12.9 million came ahead of NCB Capital’s estimates of a net loss of SAR 3.8 million, the brokerage firm said in an earnings review.

eXtra reported a net loss of SAR 45.9 million in Q1 2016.

These strong results were largely driven by lower than expected operating expense (opex), supported by a strong top-line growth and margin expansion, NCB Capital said.

Sales increased by 8.3 percent year-on-year (YoY) to SAR 805 million, broadly in-line with NCB Capital’s estimates of SAR 757 million.

Gross margins expanded by 357 basis points YoY to 16.7 percent, in-line with the brokerage’s estimates of 17 percent.

NCB Capital maintained a “Neutral” rating on eXtra with a target price of SAR 26.30, due to the muted overall outlook regarding discretionary spending in Saudi Arabia and limited store openings.

However, declining opex and strong margin expansions at eXtra are key positives.