SNB Capital sets rating, TP for Budget Saudi

Logo of The United International Transportation Co. (Budget Saudi) 

SNB Capital revised its rating on United International Transportation Co. (Budget Saudi) to “Neutral” and updated the target price (TP) to SAR 83.2 per share.

The brokerage noted that the acquisition of Al Jazira Equipment Co. (AutoWorld) will strengthen Budget Saudi’s market position, driven by a larger fleet, better pricing power, and economies of scale.

Short-term pressure on rental and sales prices is expected but will likely be mitigated by fleet expansion and acquisition synergies.

The acquisition is set to increase Budget Saudi’s fleet to 55,500 vehicles by 2024, up from 35,000 in 2023, with leasing revenue projected to grow by 43% to SAR 1.06 billion by 2026, compared to 42%, or SAR 808 million, in 2024.

Operating margins are expected to decline to 18.6% year-on-year (YoY) in 2024, from 23.4% in 2023, but should recover to 20.2% by 2026, driven by integration efficiencies.

Net profit is expected at SAR 294 million in 2024, increasing to SAR 368 million in 2025 and SAR 411 million by 2026.

While heightened competition is expected to pressure rental and sales prices in the near term, fleet expansion and synergies are anticipated to support long-term growth, SNB Capital added.

Although competition may pressure rental and sales prices in the short term, SNB Capital stated that fleet growth and merger synergies will support long-term growth.