Al Rajhi Capital initiates BinDawood coverage with ‘overweight’ rating, TP at SAR 126

Al Rajhi Capital initiated the coverage of BinDawood Holding Co. with an “overweight” recommendation and a target price (TP) of SAR 126 per share.

The company’s overall revenue and net profit are likely to grow at a compound annual growth rate (CAGR) of 6% and 14%, respectively, between 2020 and 2025.

The overall grocery market is undergoing a consolidation over the last three years due to strict regulatory requirements, which will increase the market share of organized players such as BinDawood, the brokerage noted.

In addition, the company’s e-commerce will drive like-for-like (LFL) growth, especially in the Danube segment, and support gross margins in the future.

According to the brokerage, BinDawood is likely to benefit significantly through the growth of the Western region, driven by megaprojects.

The company is net debt-free and has a strong free cash flow generation, the brokerage said, adding it expects the store expansion to be modest and capital expenditure requirement could be met mostly from internal accruals.

Al Rajhi Capital indicated that the company’s most prominent risks include the impact of the increase in value-added tax (VAT), a slowdown in economic activity, a decrease in the number of pilgrims, and slower-than-expected ramping up of new stores.