Earnings Report /
Saudi Arabia

Nahdi Medical Co: Better results on higher revenue and margins

  • Nahdi’s revenue increased by 8.2% yoy (+7.7% qoq) to SAR2.24bn and was higher than our estimates of SAR2.15bn

  • Gross profits came-in at SAR926mn (+7.7% yoy, +8.8% qoq) compared to our estimates of SAR893mn

  • Nahdi announced to distribute a cash dividend of SAR300mn for H1 22, translating into SAR2.31/share

SNB Capital
15 August 2022
Published bySNB Capital

Nahdi reported a better than expected set of Q2 22 results, with net income increasing by 18.4% yoy (+13.1% qoq) to SAR269mn. This compares to the SNB Capital estimates of SAR240mn. The positive variance in earnings is mainly driven by 1) higher-than-expected revenues which increased by 8.2% yoy (+7.7% qoq) to SAR2.24bn vs our estimates of SAR2.15bn, led by strong growth in pharma revenues and 2) improved operational efficiencies. As a result, operating margins increased by 111bps yoy to 13.7% vs our estimate of 12.5%.

  • Nahdi’s revenue increased by 8.2% yoy (+7.7% qoq) to SAR2.24bn and was higher than our estimates of SAR2.15bn. We believe the yoy increase and variance is primarily driven by strong growth from Pharma segment due to increased number of pilgrims to the two holy mosques.

  • Gross profits came-in at SAR926mn (+7.7% yoy, +8.8% qoq) compared to our estimates of SAR893mn. Gross margins contracted by 18bps yoy to 41.4% and came in-line with our estimates of 41.5%. We believe the marginal yoy contraction in gross margins is due to unfavourable sales mix.

  • Opex in absolute terms increased to SAR621mn (+3.4% yoy), but came in-line with our estimates of SAR624mn. Subsequently, opex-to-sales stood at 27.7%, lower than our estimates of 29.0%. We believe the decline in opex-to-sales is due to improved operational efficiencies. As a result, operating margins improved by 111bps yoy to 13.7% vs our estimate of 12.5%.

  • Net non-operating expenses increased by 13.7% yoy to SAR37.3mn and was higher than our estimates of SAR29.4mn. We believe the variance is mainly driven by higher finance and zakat expenses.

  • Nahdi announced to distribute a cash dividend of SAR300mn for H1 22, translating into SAR2.31/share.

Outlook

Based on our coverage initiation report published in April 22, we are Neutral on Nahdi with a PT of SAR162.8. We await the detailed financials to update our estimates. Growth in revenue and improved operational efficiencies are the key highlights of the results. We believe the healthcare reforms in Saudi and the company’s omnihealth strategy to drive the stock going forward. The stock is currently trading at a 2022f P/E and EV/EBITDA of 26.8x and 13.8x, respectively.