Al Rajhi Cap says Savola Group’s Q2 2021 profit below estimates; raises TP to SAR 40

Savola Group building

Savola Group’s net profit of SAR 200 million during the second quarter of 2021 was lower than Al Rajhi Capital’s expectation of SAR 225 million, according to a recent research note.

The group's retail business continued to suffer from some macroeconomic challenges, such as a decline in consumer spending and lower store traffic.

In the short term, challenges are expected to continue for the food retail segment, the brokerage firm said. However, in the long run, Savola is projected to benefit from the exit of many small competitors from the segment.

Savola's profit is estimated to decline by 11% to SAR 809 million in 2021, while the profit is forecast to rise in 2022 by 16% to SAR 942 million.

The brokerage firm maintained its "Neutral" recommendation on the stock, raising the target price (TP) to SAR 40 from SAR 39 per share.