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Mubasher: Al-Rajhi Capital Research maintained an 'Overweight' rating on Abdullah Al Othaim Markets on the background of Q3 results, a Monday's report revealed.
The research agency also raised the target price (TP) to SAR 88 per share, compared with SAR 84.2 earlier, according to the report.
"Al Othaim reported yet another quarter of robust performance, in-line with our view that it remains one of the safes bets in the current environment due to its higher revenue visibility vs. peers (due to near complete exposure to non-discretionary products) and steady margins", said Al-Rajhi
Q3 revenues grew 17.4% year-on-year, which is below the research firm's estimate of 20.8% growth.
Further, gross margin expanded 180bps year-on-year for the past four quarters, which cushioned the impact of increase in operating costs, which is is generally sticky, except for promotions and costs associated with rolling out new stores.
"We believe strong revenue growth led by aggressive store expansion, resultant scale efficiencies, LFL growth, market share gains, and supply chain optimization will aid Al Othaim to sustain higher gross margin going forward, which should offset majority impact of higher operating costs."
In the third quarter, net profits declined 1.21% year-on-year to SAR 36.64 million from SAR37.09 million for the same period a year earlier.