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Riyadh-based brokerage Al Rajhi Capital has raised the target price on Almarai stock to 58 ($15.46) riyals per share from 55 riyals, but maintained a ‘Neutral’ rating.
Almarai recently increased the prices of selected fresh dairy products between 8-10 percent. Last week, Al Safi Danone and Nadec also increased the price of few products in the category.
The main reason for this hike across the industry is mounting input cost resulting from rising commodity prices and removal of subsidy on imported feeds (excluding alfalfa). “We expect this price hike to add 60 to 85 million riyals to Almarai’s top-line in FY 2021e and around 150-200 million riyals from FY 2022e,” the brokerage said in a note.
The price hike will improve Almarai’s bottom-line once the input cost stabilizes, the note said.
With regards to the sector, Al Rajhi Capital said Saudi dairy players are currently facing several headwinds from rising input costs, expat exodus and lower consumer spending towards nondiscretionary products. “The rise in milk prices of few categories will provide some respite from rising cost pressure however; we still believe that this increase is not sufficient to bring the margins back to historical levels. “
(Writing by Brinda Darasha; editing by Seban Scaria)
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© ZAWYA 2021
© ZAWYA 2021
