Cairo - Mubasher: Pharos Research has maintained their fair value (FV) for Juhayna Food Industries at EGP 7.88, with an Equalweight recommendation, according to a recent report.
“Fundamentally speaking, Juhayna’s main goal this year is striking a balance between volume growth and margins,” the report indicated.
“Juhayna recorded FX losses of EGP 47 million on the back of the requoting of their foreign currency denominated liabilities.”
According to the research firm, the company’s management is fully aware of the situation and their reserved approach to pricing is justified. In the long run, they have set their eyes on recovering margins through developing higher yielding segment, and target cost cutting through relying on more local suppliers, as well as increasing exports.
However, these are all big challenges and will need time. In the meantime, saving margins over the coming two quarters can only be achieved through price increases. Given recent results, the supposed advantage of delaying price hikes is not realized as volumes seem to be declining, the report explained.
Ideally, Juhayna should reap the rewards of their gradual cost passing strategy over the coming few quarters as consumers accept price increases, but they need to retain their balanced approach and retain market share in this current environment as returning to higher margins is challenging, the report concluded.
