Extra’s Q4 beats estimate on higher revenue, says Al Rajhi Cap

United Electronics Co.’s (Extra) Q4 2017 net profit of SAR 57.6 million topped Al Rajhi Capital’s forecasts of SAR 50.1 million, the brokerage firm said in an earnings review.

Revenue came in at SAR 1.61 billion, well above the brokerage firm’s estimate of SAR 1.40 billion.

“Overall, Extra’s Q4 would have resulted in our estimates upgrades going forward, however, due to multiple reforms (VAT, electricity and gasoline price hike, citizen account and new allowances recently announced) that took effect from January 2018, we await more clarity on the same before making changes to our estimates,” Al Rajhi Capital added.

The home appliance retailer is well positioned to continue growing its market share going forward, which will drive profitability of core operations, and the long term value that can be created by its consumer financing arm.

Main upsides for the stock are high free cash flows generation, which will enable faster store expansions and boost revenue run-date going forward.

The company is projected to open two or three stores in fiscal year 2018/2019.

Meanwhile, the rise in e-commerce is likely to weigh on Extra, however, this will be mitigated by the company’s focus on e-commerce and its exclusive partnership with Noon.com.

Al Rajhi Capital added that it remained “overweight” on Extra, with the stock’s target price unchanged at SAR 53.60.