Riyadh - Mubasher: Al-Rajhi Capital has revised the target price (TP) of Savola Group from SAR 37.4 to SAR 36.8 per share and maintained their Neutral rating on the stock.
Savola’s Q4-16 has been impacted primarily by one-offs, inventory write-down, impairment of investments, and devaluation of Egyptian Pound, which resulted in SAR 964 million quarterly loss.
“While such charges may recur in the future, we believe the magnitude of the same will not be material as management said that post the extended promotions and discounted sales in the last quarter, the inventory levels have been mostly normalized,” the research firm said in its report.
Recent developments leads us to believe that the revenue and earnings profile may normalize going forward. However, both retail and food segments will face headwinds from consumer spending slowdown in the Kingdom and higher competition respectively, it added.
“Turnaround of retail segment and margin uptick in food segment will be the key re-rating catalysts for Savola,” the report indicated.
