Itqan Cap maintains ‘Neutral’ rating for Herfy, raises TP to SAR 61.80

A branch of Herfy Food Services Co.

Itqan Capital maintained its ‘Neutral’ recommendation for Herfy Food Services Co. and raised the share’s target price to SAR 61.80 from SAR 51.30.

The brokerage firm said in a research note that 2020 was a challenging year for Herfy due to the impact of the COVID-19’s precautionary measures on fast food restaurants.

Herfy reported a 16.5% year-on-year (YoY) decline in revenues during Q4 2020 on the 15% increase in value-added tax (VAT), imposing a pressure on the average consumer portfolio, in addition to the exit of expatriates.

Itqan Capital expected demand for fast food to remain slightly low in the short term as consumers adjust to lower disposable income. However, it does not expect Herfy’s 2021 revenues to reach pre-pandemic figures.

On the other hand, the Saudi-listed firm is projected to witness a significant improvement on margins and net profit performance, as non-recurring losses made 2020 a low base year.

Herfy is expected to report a net profit of SAR 73 million in 2021, SAR 94 million in 2022 and SAR 111 million in 2023.

The research firm’s “Neutral” recommendation means that the stock will stay in the range of it value (up/down 10%) in a 52-week period.