- Revenues declined 4.1% yoy (-11.1% qoq) to SAR418mn and were lower than our estimate of SAR428mn
- Gross profit decreased by 16.1% yoy (-23.4% qoq) to SAR123mn and was lower than our estimate of SAR132mn
- Operating income stood at SAR17mn, compared to SAR24mn in Q1 20, and lower than our estimate of SAR21mn
Saudi German reported a weak set of Q1 21 results, as net income declined 42.9% yoy (-57.6% qoq) to SAR12mn. This compares with the NCBC and consensus estimates of SAR17mn and SAR21mn, respectively. The weakness primarily came from lower revenues, which declined by 4.1% yoy (-11.1% qoq) and were lower than our estimates of SAR428mn. The decline is attributed to lower volumes from one of its key clients.
Revenues declined 4.1% yoy (-11.1% qoq) to SAR418mn and were lower than our estimate of SAR428mn. We believe the variance is attributed to decrease in business volume from one of the company’s key clients.
Revenues of the listed Healthcare sector increased by 22.0% yoy (+1.0% qoq) to SAR3.63bn. HMG and Hammadi revenues grew by 26.2% yoy (flat qoq) and 34.7% yoy (-4.6% qoq) in Q1 21, while Mouwasat revenues increased by 8.1% yoy (flat qoq).
Gross profit decreased by 16.1% yoy (-23.4% qoq) to SAR123mn and was lower than our estimate of SAR132mn. Similarly, gross margins also contracted 422bps yoy to 29.4% and were lower than our estimate of 30.7% and Q1 20 levels of 33.7%. In comparison, gross margins of the listed sector expanded by c210bps to 35% in Q1 21 vs 33.0% in Q1 20, with all the companies recording higher margins except SGH.
In absolute terms, operating expenses declined by 13.7% yoy (-15.2% qoq) to SAR106mn vs SAR123mn in Q1 20 and SAR125mn in Q4 20. This compares with our estimate of SAR111mn. Consequently, opex-to-sales decreased to 25.3% in Q1 21 vs 28.1% in Q1 20 and was broadly in-line with our estimate.
Operating income stood at SAR17mn, compared to SAR24mn in Q1 20, and lower than our estimate of SAR21mn. Operating margins declined from 5.6% in Q1 20 to 4.2% in Q1 21, which we believe is due to continued losses at the new hospital. Dammam facility reported a loss of cSAR20mn in Q1 21 vs loss of SAR19mn in Q1 20.
SGH’s net income declined by 42.9% (-57.6% qoq) in Q1 21 vs a growth of 33.0% yoy (+8.0% qoq) for the sector.
We are Neutral on SGH with a PT of SAR39.8. We believe improved operating efficiency and the ramp-up of Al Dammam hospital are key stock catalysts. However, high account receivables remain a concern. The stock trades at 2021f PE of 14.3x vs the peer group average of 37.5x (30.5x excluding HMG).
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The authors of this report hereby certify that the views expressed in this document accurately reflect their personal views regarding the securities and companies that are the subject of this document...