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Saudi Arabia

BinDawood Holding: Q3 22 Results Analysis | First quarterly losses on lower margins

  • Revenues increased by 9.7% yoy (-3.1% qoq) to reach SAR1.18bn and came in-line with our estimates of SAR1.16bn.

  • During the quarter, BinDawood opened its first international supermarket in Bahrain.

  • Gross margins contracted significantly to 26.0% vs 36.9% in Q3 21 and were lower than our estimates of 33.0%.

SNB Capital
10 November 2022
Published bySNB Capital

BinDawood reported a disappointing set of Q3 22 results, with net losses of SAR48.0mn compared to a net profits of SAR70.2mn and SAR42.3mn in Q3 21 and Q2 22, respectively. This is significantly lower than the SNB Capital and consensus estimates profits of SAR60.9mn and SAR48.0mn, respectively. The variance is driven by 1) lower gross margins which stood at 26.0% vs 36.9% in Q3 21 and our estimate of 33.0% due to increased promotional activities and lower supplier incentives and 2) higher opex due to increase in staff and acquisition related costs. Subsequently, opex to sales stood at 28.2% vs our estimate of 26.0%.

  • Revenues increased by 9.7% yoy (-3.1% qoq) to reach SAR1.18bn and came in-line with our estimates of SAR1.16bn. The yoy increase in revenue is due to higher sales from BinDawood stores and contributions from its recently acquired overseas subsidiary Ykone. The company was one of the beneficiaries of higher Hajj pilgrims due to its significant presence in the Haramain region. In comparison, AlOthaim’s sales increased by 17% yoy in Q3 22 while Panda’s revenues decreased by 5% yoy.

  • During the quarter, BinDawood opened its first international supermarket in Bahrain. As a result, BinDawood’s total store count reached to 83 (including 54 hypermarkets, 26 supermarkets and 3 express stores).

  • Gross margins contracted significantly to 26.0% vs 36.9% in Q3 21 and were lower than our estimates of 33.0%. We believe the yoy contraction and negative variance in gross margins is due to increased promotional activities and lower supplier incentives. We believe this is a key negative of the results.

  • Opex in absolute terms increased by 10.5% yoy to SAR334mn in Q3 22, higher than our estimates of SAR303mn. Opex-to-sales stood at 28.2% in Q3 22 vs 28.0% in Q3 21 and our estimate of 26.1%. We believe the yoy increase and variance in opex is due to higher staff and acquisition related costs.

  • Non-operating expenses in Q3 22 stood at SAR21.5mn vs SAR25.2mn in Q3 21 and our estimate of SAR19.3mn. We believe the variance is driven by lower other income and higher lease finance costs.

Outlook

Based on our last update, we are Neutral on BinDawood with a PT of SAR105.0. We will update our valuations once the full financial are available. We believe the company’s long-term outlook is positive supported by the increase in the number of pilgrims in Makkah and Madinah and store expansion plans. However, weak margins is a key concern. The stock currently trades at 2023f P/E and EV/EBITDA of 16.5x and 6.6x vs peer group average of 15.9x and 8.6x, respectively.