Aljazira Cap says Budget Saudi’s Q1 2021 profit exceeds estimates, raises TP to SAR 40.30

A branch of United International Transportation Co.

United International Transportation Co.’s (Budget Saudi) Q1 2021 net profit of SAR 55.2 million exceeded Aljazira Capital’s estimates of SAR 45 million.

The brokerage said that the deviation from the estimate was due to more-than-expected gain on the sale of vehicles and higher gross margin. In addition, vehicles were sold in higher number with better margins compared to Q1 2020.

“As expected, the adverse impact of the COVID-19 pandemic continued to weigh on the short-term rentals and leasing businesses. We expect this pressure to remain in the short term, while recovery would be more evident in H2 2021,” the brokerage noted.

Aljazira Capital said that the expected acceleration in vaccination drive and planned removal of restriction on international travel in May are likely to improve operating conditions for the company in H2 2021.

Given the increase in demand for used cars in the past few quarters and anticipated lower use of car rental services in 2021, the growth in the sale of used vehicles is likely to remain strong this year. Consequently, margins would also improve, the brokerage noted.

Aljazira Capital maintained its “Neutral” recommendation on the stock, raising the target price (TP) to SAR 40.3 from SAR 34.3 per share on better-than-expected results and a positive long-term outlook.