Riyadh-Mubasher: Saudi Arabia’s dairy producer Almarai Co. is expected to re-price some of its products that are not subject to government pricing, Albilad Capital said in a report.
Almarai requested an adjustment for local milk price to curb the financial impacts of the government decisions.
The dairy producer estimated the impact of the government decision to raise energy prices at nearly SAR 300 million. In addition, Almarai forecasted the cost of production to rise by SAR 200 million in 2016.
“Nonetheless, profits margins will be squeezed factoring in staggering expansions as well as fierce competition in some markets,” Albilad said.
The research firm set the stock’s fair value at SAR 77, with an upside potential of 11.5% to the stock price of SAR 69.07 on the evaluation date. It assigned the stock an ‘Overweight’ rating.
“We remain positive on Almarai’s growth prospects on the back of population growth, expansions and changing dietary habits as well as boasting a robust and established brand name, thus providing it an edge over its competitors,” Albilad said.
