Sulaiman Al Habib Group Q4 2020 profit exceeds expectations: AlJazira Cap

Dr Sulaiman Al Habib Medical Group’s (HMG) net profit of SAR 317.9 million for the fourth quarter of 2020 came above AlJazira Capital and consensus estimates of SAR 285 million and SAR 301.8 million, respectively.

The brokerage firm said in an earning review that even though the company is expected to deliver positive net income growth, the extent of growth posted in Q4 2020 might not be sustainable in the long-term, as margins could come under pressure due to capacity additions plans and competition from other players.

“Despite the company having strong fundamentals, supported by ambitious growth plans, most of the positives seem to be factored in the current price," AlJazira Capital said.

Delay in the expansion plans and any adverse development on the macro-economic front pose a downside risk to HMG’s valuation.

The key challenge for HMG is to improve its utilization rate and maintain its gross profit margin, as other private companies also have expansion plans.

AlJazira Capital maintained its recommendation as "Neutral", with a target price (TP) of SAR 108 per share.