Earnings Report /
Saudi Arabia

BinDawood Holding: Opex growth leads to weaker results

  • Revenue decreased by 0.4% yoy (-4.0% qoq) to SAR1.08bn, lower than our estimates of SAR1.13bn

  • Gross margins expanded by 395bps yoy to 36.9% and was higher than our estimates of 35.4%.

  • Operating expenses in absolute terms increased by 12.0% yoy to reach SAR302mn compared to our estimates of SAR283mn

SNB Capital
9 November 2021
Published bySNB Capital

BinDawood reported a weaker than expected set of Q3 21 results with a net income of SAR70.2mn declining by 10.7% yoy and 26.1% qoq. This is lower than the SNBC and consensus estimates of SAR97.6mn and SAR93.1mn respectively. The negative variance in earnings is due to 1) lower than expected sales which stood at SAR1.08billion (-0.4% yoy, -4.0% qoq) compared to our estimates of SAR1.13bn 2) higher than expected operating expenses due to the suspension of COVID-19 related governmental waivers and additional employment costs. As a result, opex-to-sales stood at 28.0% yoy vs our estimate of 25.0%.

  • Revenue decreased by 0.4% yoy (-4.0% qoq) to SAR1.08bn, lower than our estimates of SAR1.13bn. We believe the negative variance in sales is the result of easing of travel restrictions during the summer holiday which led to lower footfall in stores.

  • At the end of Q3 21, BinDawood’s total store count stood at 76 of which 52 are hypermarkets and 24 are supermarkets.

  • Gross margins expanded by 395bps yoy to 36.9% and was higher than our estimates of 35.4%. We believe the positive variance in gross margins is the result of procurement efficiency and improved inventory management. Subsequently gross profits stood at SAR397mn in-line with our estimates.

  • Operating expenses in absolute terms increased by 12.0% yoy to reach SAR302mn compared to our estimates of SAR283mn. This translates to an opex-to-sales of 28.0% in Q3 21 vs 24.9% of Q3 20 and our estimate of 25.0%. We believe the yoy increase and variance is driven by the suspension of COVID-19 related government waivers for businesses and additional employment costs.

  • Non-operating expenses stood at SAR25.2mn increasing 208% yoy and coming higher than our estimates of SAR20.0mn. We believe the yoy increase and variance is driven by higher lease and zakat expense.

Outlook

Based on our last update, we are Neutral on BinDawood with a PT of SAR118.6. Expansion in gross margins is the key positive of the result, while increased opex and lower sales are the major negatives. High profitability, strong supplier relations, measured expansion approach and a strong management team are the stock’s key strengths. The stock trades at 2021f P/E of 25.8x, compared to peer group average of 24.0x.