AlJazira Cap says Dallah’s Q4 2020 profit misses estimates, maintains ‘Neutral’ rating

Dallah Healthcare Co.’s Q4 2020 net profit of SAR 20.1 million missed AlJazira Capital and consensus estimates’ of SAR 50.4 million and SAR 45.4 million, respectively.

The drop in profit was attributed to a slight decline in the gross profit margin and a sharp increase in operating expenditure, the brokerage said in its latest report.

The decline in gross profit margin could be partially attributed to start-up operations losses for Dr. Mohammed Alfagih Hospital.

Moreover, the surge in operating expenses could be due to provisional losses as a result of the slowdown of economic cycles for a few customers.

AlJazira Capital expected the company’s margins to be under pressure in the near-term due to the start of operations at the West Expansion of Dallah Hospital, Al-Nakheel, Riyadh.

However, the stability at the newly launched hospital at Al-Nakheel, expansion at Namar and positive impact of recent acquisitions are likely to be the key drivers of long-term growth.

Dallah is expected to report a net profit of SAR 144.4 million in 2021, an increase of 44.3% year-on-year (YoY).

AlJazira Capital maintained its “Neutral” rating on the stock, setting the target price at SAR 48.3 a share.

The “Neutral” rating implies that the stock is trading in the proximate range of its 12 months price target and is expected to stagnate within +/- 10% range from the current price levels over the next 12 months.