Al Rajhi Capital maintains a neutral rating for Fawaz Abdulaziz Al Hokair & Co, including recommendations to maintain its position in its shares, and reduce the price target to SAR 19, compared to the previous SAR 24.
The research company said in a report on Sunday that the price-cutting target came because it expected existing local store sales to continue to weaken in the near future due to lower spending on non-essential goods and a lower customer base.
The company's results for the second quarter ended September 30 2018 were lower than their estimates and below the average analyst estimates of 30 and 46 million riyals respectively.
Al Rajhi Capital said there was a possibility that the company's revenue would decline due to unprofitable branch closures.
The company has changed its strategy towards increasing profitability rather than expanding the number of stores. The company currently focuses on unprofitable store closures while increasing the level of cost effectiveness to increase its profit margins.
"In the future, we expect AlHokair to restructure and change its business model to diversify its revenue stream."
For the short term, corporate earnings are expected to remain low, influenced by weak consumer sentiment as the basket of consumers and customer base changes (decreasing foreign population).
"The prospect of positive reflection in the company's international business division and the expansion of value-added products, coupled with recent sales of the cosmetic product division, will result in a reduction in existing store sales in the medium term."
The company's financial statements for the second quarter ended September 30, 2018 showed growth in net profit of 46.6% to SAR 10.03 million, compared with SAR 6.84 million for the same quarter last year.
Stocks ended the session on Sunday at 22.70 riyals, a decline of 2.83%.
Al-Hayat News Al-Youm: A research company that maintains Al-Hokair's classification and decreases its share target. You can see the original news source from the following link: Mubasher (Economy).