BinDawood reported a weaker than expected set of Q1 22 results with net income increasing by 5.4% yoy (+395% qoq) to SAR65.5mn. This is lower than the SNB Capital and consensus estimates of SAR72.3mn and SAR71.1mn, respectively. We note that BinDawood reported a one-off rental relief of SAR17.1mn in Q1 22, excluding this the net income stood at SAR48.4mn. Revenue increased by 4.5% yoy (+11.2% qoq) to SAR1.18bn and came in-line with our estimates of SAR1.16bn. The negative variance in earnings is mainly driven by an increase in operating expenses due to the costs associated with new stores opened in 2021.
Revenue increased by 4.5% yoy (+11.2% qoq) to SAR1.18bn and came in-line with our estimates of SAR1.16bn. We believe the yoy increase in sales is due to Ramadan and Back to School seasons. Also, the company’s Haramain stores benefitted from the lifting of all Covid-19 restrictions.
In comparison, AlOthaim’s sales increased by 17.4% yoy in Q1 22 while Panda’s (Savola retail segment) revenue increased by 3.2% yoy. We believe Othaim benefited from the consumer down trading due to inflationary pressures during the quarter.
Gross margins contracted by 56bps yoy to 32.6% and came lower than our estimates of 33.5%. We believe the yoy contraction and negative variance in gross margins is due to higher sale of discounted products. As a result, gross profits stood at SAR384mn in-line with our estimate of SAR390mn.
Operating expenses in absolute terms increased by 8.5% yoy to SAR311mn vs our estimate of SAR296mn. Opex-to-sales stood at 26.5% in Q1 22 vs 25.5% in Q1 21 and our estimate of 25.4%. We believe the yoy increase and variance in opex is due to costs associated with the new stores opened during 2021.
Non-operating expenses stood at SAR7.4mn vs SAR24.7mn in Q1 21 and our estimate of SAR21.8mn. We believe the yoy decline is driven by one-off rental relief of SAR17.1mn received during the quarter. Excluding this, non-operating expenses stood at SAR24.5mn.
Based on our last update, we are Neutral on BinDawood with a PT of SAR105.0. Despite the weak results, we believe the company’s long-term outlook is positive supported by increase in the number of pilgrims in Makkah and Madinah post the removal of travel restrictions and the company’s store expansion plans. The stock currently trades at 2022f P/E and EV/EBITDA of 26.4x and 10.7x, respectively.