NCB Capital ‘overweight’ on Savola despite Q2 profit miss

The Savola Group’s second-quarter net profit of SAR 434.4 million fell short of NCB Capital’s (NCBC) forecast of SAR 494.9 million by 12.2 percent, the brokerage firm said in a report.

However, NCBC has placed an “overweight” rating on the stock on its attractive valuations, and set a target price of SAR 89.1.

“The stock trades at a 2015E P/E of 19.3x vs. food sector P/E of 21.1x which remains attractive,” NCBC added.

The edible oil producer’s net profit was hurt by operational difficulties faced by the international food division, as well as higher selling, general and administrative (SG&A) expenses on the launch of new stores.

On Tuesday, Savola revised full-year guidance down by ten percent to SAR 1.6 billion and said it expects a net income of SAR 355 million for Q3, a decline of 30.3 percent year-on-year.

“Provided the reported net profit for H1-2015 was down 3.3 percent y-o-y, this implied that H2-2015 adjusted net profit will remain flat vs. our expectations of a growth of two percent y-o-y,” NCBC said.