Beltone Financial expected an improvement in the profitability of consumer sector companies in Saudi Arabia, due to improved sales and higher product prices.
Beltone Financial has set a target price for the Savola Group at 34.4 riyals per share, with a hold rating.
It also set a target price for SADAFCO’s share at 163.3 riyals, with a recommendation to keep.
In an interview with Al-Arabiya, Engy Al-Diwany, director of consumer research at Beltone Financial, said that the financial results of the SADAFCO, Savola or NADAC companies reflect the strong recovery of the consumer sector in the Saudi market.
Al-Diwani stated that there is a huge boom in the volume of revenues recorded in the sector, due to the price increases and the return of the Hajj and Umrah activity again.
She pointed out that these factors boosted sales growth by more than 20% for the majority of the sector’s companies.
Al-Diwani expected the continued growth of consumer sector revenues during the current year, supported by the return of Hajj and Umrah and the lifting of travel restrictions that were imposed over the past two years.
She stated that the rise in commodity costs may put pressure on the profit margins of companies during the current year, noting the impact of high feed prices on dairy companies.
Al-Diwani expects that the cost increase will be delayed by dairy companies in the Kingdom, explaining that dairy prices fell by 5% in this May compared to last month, while the increase reached 20% at the end of 2021.
Regarding the companies that will be affected by the interest rate hike, she said that the impact will be strong on Savola, as a result of the large volume of debts in the company’s financial statements, while it will affect positively for “SADAFCO”, as a result of its cash balance devoid of any debts and bank facilities.