Higher market share via expansions to boost SACO; TP raised to SAR 64: AlJazira Cap

SACO branch

Saudi Company for Hardware (SACO) will benefit from growth opportunities through store expansion, introduction of new product categories, launch of new distribution center, and increased online sales, all of which could lead to a higher market share, AlJazira Capital said in a recent report.

New store openings are expected to drive growth, while e-commerce is likely to account for 10% of sales over next two years, the report said.

The company also stands to benefit from the continued increase in mortgage loans, as it will boost demand for home improvement.

SACO’s repayment of debt is expected to enable the company to borrow for real estate ventures, as the company seeks to build a shopping mall in Jeddah at SAR 130 million. The repayment of debt will enable the company to finance the project at a lower cost.

SACO is expected to report SAR 94 million in net earnings in 2021, SAR 105 million in 2022 and SAR 116 million in 2023.

Aljazira Capital revised SACO’s target price (TP) to SAR 64.0/share, from SAR 57.10/share, and retained a ‘Neutral’ rating on the stock.