Riyadh-Mubasher: NCB Capital (NCBC) reinstated its ‘Overweight’ rating on Savola with a price target of SAR 81.9 and ‘Neutral’ on Almarai with a price target of SAR 79.2.
Commodity prices continue to support gross margin expansion for both companies. However, expansions are leading to higher Opex and short-term pressures on EBIT margins.
The key growth driver in Savola remains the retail segment, with an expected revenue CAGR growth of 15.6% till 2020E.
“Savola is our top pick due to the positive outlook for the retail sector and an attractive core 2016E P/E of 8.4x vs. sector at 15.8x,” NCBC said.
