Ubhar Capital raises Al Rajhi Bank’s rating to ‘Buy’, cuts TP to SAR 91

Logo of Al Rajhi Bank

Ubhar Capital upgraded its recommendation on Al Rajhi Bank to “Buy”, but reduced the stock’s target price (TP) from SAR 98.1 to SAR 91 per share.
 

In a recent note, Ubhar Capital said it believes that this TP is justified because of the bank’ strengths as compared to its peers as well as a firmer growth trajectory amid a mega-project pipeline. Furthermore, recent completion of Tier 1 Sukuk issuance will be a drag on return for the equity shareholders but will provide the necessary capital boost for growth, while the financial soundness indicators of the bank remain resilient, and margin expansion to kick in by the end of 2023.

Al Rajhi Bank improved its capital adequacy metrics through lower payouts and higher income generation. Further, it has issued capital and has recently completed issuance of Tier 1 Capital Securities, which is expected to have boosted its capital adequacy metrics.

“Given the positive outlook on Saudi’s real GDP growth, we believe that credit growth will remain strong for RJHI. For RJHI, while mortgage lending growth will be front-loaded at the start of the forecast period, it will continue to remain strong supporting overall financing growth for the bank,” Ubhar Capital added.

Al Rajhi Bank is expected to post a net profit of SAR 17.1 billion and SAR 20.3 billion in 2022 and 2023, respectively, Ubhar Capital concluded.