Al Rajhi Capital has maintained a neutral rating for Fawaz Abdulaziz Al Hokair & Co., including a recommendation to retain positions in its shares and lower the target price to 19 SAR compared to the previously issued SAR 24.
The research firm said in a report on Sunday that targeted price cuts have occurred since it is expected that sales of existing local stores will continue to weaken in the near future due to lower costs for non-essential goods and a lower customer base.
The company's results for the second quarter ended September 30, 2018 were below their estimates and below the average of analysts' estimates of 30 and 46 million rials, respectively.
Al-Raji Capital said it is likely that the company's revenue will fall due to the closure of unprofitable subsidiaries.
The company shifted its strategy to increase profitability, and not to expand the number of stores. Currently, the company focuses on closing down unprofitable stores, while at the same time increasing economic efficiency to increase its profits.
“In the future, we expect AlHokair to restructure and change its business model to diversify its revenue streams.”
In the near future, the company's income is expected to remain at a low level, which will affect weak consumer sentiment as the consumer basket changes and the client base falls (the number of foreign population decreases).
“The prospect of a positive reflection in the company's international business unit and the expansion of value-added products in combination with recent sales of the cosmetics business unit will lead to a reduction in sales of existing stores in the medium term.”
The company's financial statements for the second quarter ended September 30, 2018 showed net profit growth of 46.6% to 10.03 million SAR compared to 6.84 million Shekels during the same quarter last year.
Shares ended the session on Sunday at 22.70 riyals, which is 2.83% less.
News | Al-Hayat Al-Youm: a research company that maintains its classification of Al-Hokair and reduces the target value of shares. You can view the source of the original news at the following link: Mubasher (Economy).