Aljazira Cap remains ‘neutral’ on Almarai; Halwani upgraded to ‘overweight’

Aljazira Capital has maintained its “neutral” rating on Almarai Co. and set its 12-month target price at SAR 73.80, as the company is expected to see a SAR 200 million increase in operating million annually, the brokerage firm said in a report.

The sharp increase in costs would be driven by a recent fuel price hike and a local ban of green fodder production, and may potentially weigh on Almarai’s cash flow. Estimated net income for fiscal year 2016 was revised to SAR 1.97 billion from SAR 2.34 billion.

“Almarai’s net income of our estimates would decline by about 15.5 percent in 2016, the brokerage firm predicted. “Consequently, the net income of Almarai for 2016 stands revised to SAR 1.97 billion from the earlier estimate of SAR 2.33 billion.”

The investment arm of Bank Aljazira upgraded Halwani Bros to “overweight” and set its 12-month target price at SAR 81.70. The recommendation was based on the expectation that low raw material costs and capacity expansion in the company’s core business will drive growth this year.

“Based on our revised assumptions, Halwani’s net income of our updated estimates would decline by about 6.9 percent in 2016. Consequently, the net income of HB Co. for FY2016 stands revised to SAR 118.44 million from earlier estimate of SAR 127.16 million,” the report said.

Aljazira Capital also maintained an “overweight” rating on Al-Jouf Agriculture “overweight” with a 12-month target price of SAR 30.10. Projected expansion within Al-Jouf’s olive cultivation business is seen to drive growth this year, despite an expected increase in operating costs.