Earnings Report /
Saudi Arabia

Dr Sulaiman Al Habib: Q3 22 Results Analysis | Higher-than-expected result on lower non-opex

  • Revenues grew by 11.8% yoy (+1.9% qoq) to SAR2.05bn and were marginally lower than our estimate of SAR2.09bn.

  • Gross profit increased by 16.2% yoy (+1.6% qoq) to SAR682mn, but were lower than our estimate of SAR692mn.

  • Operating expenses increased 19.3% yoy (3.8% qoq) to SAR246mn and was higher than our estimate of SAR231mn.

SNB Capital
24 October 2022
Published bySNB Capital

Sulaiman Al-Habib Group (HMG) reported a mix set of Q3 22 results, with a net income of SAR421mn, up 20.7% yoy (+5.6% qoq). This is higher than the SNB Capital and consensus estimates of SAR405mn, and SAR403mn, respectively. Revenues grew by 11.8% yoy (+1.9% qoq) to SAR2.05bn, but were marginally lower than our estimates. Operating expense were significantly higher with opex-to-sales increasing to 12.0% in Q3 22 vs our estimate of 11.0%. The impact of higher operating expense was more than off-set by lower non-operating expense.

  • Revenues grew by 11.8% yoy (+1.9% qoq) to SAR2.05bn and were marginally lower than our estimate of SAR2.09bn. We believe the growth in revenue was primarily driven by the performance of hospital segment. The increase in hospital revenue can be attributed to higher patient footfall which also resulted in strong performance by the pharmacy segment.

  • Gross profit increased by 16.2% yoy (+1.6% qoq) to SAR682mn, but were lower than our estimate of SAR692mn. However, gross margin improved c128bps yoy (down c10bps qoq) to 33.2% and was in-line with our estimate of 33.0%.

  • Operating expenses increased 19.3% yoy (3.8% qoq) to SAR246mn and was higher than our estimate of SAR231mn. Subsequently, opex-to-sales stood at 12.0% vs 11.2% in Q3 21 and was higher than our estimate of 11.0%. We believe the higher opex came as a result of higher ECL charges.

  • Operating income stood at SAR436mn, up 14.6% yoy (5.1% qoq, but was lower than our estimate of SAR461mn. Operating income margin improved c53bps yoy to 21.2% in Q3 22, but was lower than our estimate of 22.0%.

  • In absolute terms, net-non-operating expense stood at SAR15.6mn, as compared to SAR31.3mn in Q3 21 and SAR16.6mn for Q2 22, and against our estimate of SAR26.7mn.

  • HMG announced a cash dividend of SAR301mn (SAR0.86/share) for Q3 22. This is similar to Q2 22 dividend payout. For 2022f, we expect the company to pay a dividend of SAR3.5/share which reflects a dividend yield of 1.8%.

Outlook

Based on our last update published in July 22, we are Neutral on HMG with a PT of SAR201.7. We believe strong expansion pipeline coupled with improved efficiency are key earnings drivers going forward. However, new hospital openings may pressure margins. The stock trades at 2023f P/E of 38.4x vs the peers average of 30.6x.