Earnings Report /
Saudi Arabia

Shaker: Q3 22 Results Analysis | Earnings miss on lower sales and higher opex

  • Revenues decreased 0.9% yoy (-18.3% qoq) to SAR258mn, and came lower than our estimates of SAR282mn.

  • Gross margins expanded by 39bps yoy to 22.4% in Q3 22 and came higher than our estimates of 21.5%.

  • Operating expenses in absolute terms increased 4.6% yoy to SAR46.9mn and came in line with our estimates.

SNB Capital
10 November 2022
Published bySNB Capital

Shaker reported a weak set of Q3 22 results declining by 29.2% yoy (-26.9% qoq) to SAR8.5mn. This is lower than the SNB Capital and consensus estimates of SAR12.7mn and SAR13.4mn, respectively. We believe the variance in earnings is mainly driven by 1) lower-than-expected revenues which stood at SAR258mn (-0.9% yoy, -18.3% qoq) vs our estimates of SAR282mn due to weak sales from Home Appliance segment. 2) higher opex due to increased employee costs related to new hirings. However, this was partially mitigated by the improved gross margins which stood at 22.4% vs our estimates of 21.5% due to effective cost control measures. 

  • Revenues decreased 0.9% yoy (-18.3% qoq) to SAR258mn, and came lower than our estimates of SAR282mn. The variance in revenue was driven by lower sales from Home Appliance segment due to slowdown in consumer spending and inflationary pressures. AC sales in Q3 22 increased by 25.1% yoy to cSAR178mn and accounted for 69% of the top-line. Home appliances revenue decreased by 33.0% yoy to cSAR78mn, representing 31% of total sales.

  • Gross margins expanded by 39bps yoy to 22.4% in Q3 22 and came higher than our estimates of 21.5%. The yoy improvement and variance in gross margins is due to effective control of direct and input costs.

  • Operating expenses in absolute terms increased 4.6% yoy to SAR46.9mn and came in line with our estimates. Opex-to-sales stood at 18.2% in Q3 22 vs 17.2% in Q3 21 and vs our estimate of 16.5%. We believe the increase in opex to sales is due to higher employee costs related to new hirings.

  • Net other expenses stood at SAR2.2mn vs SAR0.3mn in Q3 21 and our estimates of SAR1.3mn. We believe the yoy increase and variance is mainly due to higher zakat expenses.

  • Shaker completed the 23.44% capital reduction by cancelling 14.77mn shares. Following the capital reduction, company’s capital stood at SAR482mn and shares at SAR48.2mn.

Outlook

Based on our last update, we are Underweight on Shaker with an adjusted PT of SAR20.9. We will update our PT and estimates once the full financials are published. The increase in gross margins is the key positive of the results while the decline in home appliance revenue and higher opex are the main concerns. The stock is trading at a 2023f P/E and EV/EBITDA of 27.2x and 35.2x vs peer group average of 24.2x and 16.3x, respectively.