Riyadh – Mubasher: Aljazira Capital expected Almarai Company’s revenue and profit growth to hover at the low-single digits during 2021, on higher value-added tax (VAT) implementation and lower subsidy, besides higher demand in 2020 that were largely driven by COVID-19.

The research entity remained ‘Neutral’ on Almarai’s stock, with a revised target price (TP) of SAR 52 per share.

Aljazira Capital expected Almarai’s poultry profits during the first half (H1) of 2021 to remain softer compared to last year. The entity attributed this outlook to more sales shifted toward the lower margin frozen category amid ongoing recovery in the foodservice sector.

“Bakery segment sales and profit may continue to lag until schools reopen,” according to the report on Sunday. It said, “the weigh on additional cost will continue to pressurize the gross margin, as the company will not be able to pass the cost increase to the customers.”

As Almarai lost its market share in Oman to a local player, Aljazira Capital estimated current market share to be record further contraction during 2021.

“Almarai currently trades at an estimated forward PE multiple of 25.6x compared to the current TTM PE of 26.4x. Any higher-than-expected commodity prices increase, which might pressurise the gross margins, is considered as a key downside risks to our valuation. While gaining higher-than expected market share in export markets is our Key upside risks to our valuation,” Aljazira Capital said.

The company’s shareholders have recently approved a cash dividend of SAR 1 billion for 2020.