Fawaz Alhokair’s Q3 FY2020/21 misses profit estimates: AlJazira Cap

Logo of Fawaz Alhokair

Fawaz Abdulaziz Alhokair Co.’s net loss of SAR 128.6 million for the third quarter (Q3) ended December 2020 came against AlJazira Capital’s and analysts’ estimates of profits of SAR 62.5 million and SAR 19 million respectively, the brokerage firm said in a report.

The deviation in Q3 earnings was attributed to a sharp contraction in the gross profit margin due to certain non-recurring expenses and accumulated inventory shrinkage.

AlJazira Capital expects margins to improve as the company is putting efforts to streamline the supply chain and inventory management system.

The brokerage firm further believes that Alhokair will benefit from increased retail demand, which will primarily drive growth in the long-term.

“With the new management implementing cost-saving initiatives and completion of the inventory write-off, we expect the operating results to improve,” it noted.

AlJazira Capital updated FY2021 loss per share to SAR 4.11 to reflect the Q3 FY2020/21 results for the company.

The firm maintained its “Neutral” rating on Alhokair with a target price (TP) of SAR 22.70/share.

The rating implies, according to AlJazira Capital, that the stock is trading in the proximate range of its 12 months price target. It is expected to stagnate within +/- 10% range from the current price levels over next 12 months.