United Electronics Co. (eXtra) reported a net income of SAR 21.6 million in Q1 2018, significantly higher than NCB Capital and consensus estimates of SAR 18.4 million and SR16.7 million, respectively.
"We believe the better than expected results are mainly driven by a 7.5 percent year-on-year (YoY) revenue growth and Opex efficiencies, which led to an expansion in margins across all profit lines," the research firm said in a report.
eXtra's sales came in at SAR 865 million, broadly in-line with NCB Capital's estimate of SAR 3.34 billion.
Sales were supported by higher market share from sector consolidation and increased consumer spending as a result of government allowances like the Citizen’s Account Program and inflation allowance.
Gross margins increased by 98 basis points YoY to 17.7 percent, coming ahead of the brokerage firm's forecast of 17 percent due to a change in the overall product mix towards higher margin electronic and home appliances products.
In its earnings call, the company’s management highlighted the increasing demand for relatively higher margin mobile phones (LG, Huawei and HTC) versus brands like Apple and Samsung.
The retailer's gross profit rose 13.8 percent to SAR 152.9 million, as YoY margin expansion.
NCB Capital remained “neutral” on the stock, setting its target price at SAR 32.1.
"We believe positive LFL and increasing market share will support revenue growth. Besides, the government’s allowance payments and consolidation trends will maintain discretionary spending unchanged for Saudi families. This will continue to support gross margin expansion," it added.
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