Itqan Cap maintains ‘neutral’ for eXtra; lowers target price to SAR 52.20

Itqan Capital cut the target price for United Electronics Co. (eXtra) to SAR52.2 per share but maintained its “neutral’ recommendation due to the recent rise in the number of outstanding shares and minimal impact from COVID-19.

The COVID-19 shutdown didn’t seem to have a significant impact on the company’s sales during Q1 2020, the brokerage said, noting the e-commerce platform supported the company’s top-line performance.

Itqan Capital expects a significant increase in revenues from the consumer finance segment in future, given the market conditions and the increasing rate of unemployment from the impact of the pandemic. In addition, “Tasheel Finance”, a consumer finance service, will support any potential decline in sales in the retail segment, leading to a faster rebound of Extra compared to its competitors.

The increase in the value-added tax (VAT) from July 2020 will also lead to a higher-than-average in sales in June, as consumers are likely to lock eXtra’s durable products at a lower price.

Moreover, the negative impact of COVID-19 is likely to be reflected in the company’s Q2 2020 financials. However, the anticipated increase in June retail sales and a surge in financing services revenue will partially offset the complete shutdowns that took place in April.

Itqan Capital expected eXtra to post a net profit of SAR 130 million in 2020, which will increase to SAR 226 million in 2021.