Jarir Marketing beats Q3 estimates: Al Rajhi Capital

Jarir Marketing Company’s Q3 earnings gained 16.8 percent year-on-year to reach SAR 288 million in Q3 2018, beating Al Rajhi Capital and consensus estimates of SAR 252 million and SAR 258 million, respectively.

Top-line surged 17 percent year-on-year (YoY), largely driven by increase in number of stores and higher sales across most divisions, while EBIT margin broadly remained flat at 14.8 percent (+8bps YoY), largely in line with Al Rajhi Capital’s estimate of 14.9 percent.

“We believe that the company benefitted from successfully implementing its strategy of adjusting its product mix in line with changing consumer behavior,” the brokerage firm said in an earnings review on Tuesday.

Al Rajhi Capital also raised its target price for Jarir Market to SAR 177 per share post its Q3 earnings results (from SAR 166 earlier), while remaining Neutral on the stock.

Going forward, the brokerage firm expects the company to ‘steadily increase its number of stores, enabling it to capture higher market share amid shift of market towards organized players’.

Moreover, it said, better than expected LFL (like-for-likes) growth and successful roll out of new stores will spur revenue run-rate and drive operating leverage.

However, the brokerage firm said, downside risks include competition from pure play e-commerce companies (e.g. Souq.com, Noon.com). Upside risks include better-than expected consumer spending on the back of higher citizen account program pay outs vs. our estimates.