Earnings Report /
Saudi Arabia

Nahdi Medical Co: Q3 22 Results Analysis | In-line results on higher revenue

  • Nahdi’s revenues increased by 5.7% yoy (-3.6% qoq) to SAR2.16bn and came in-line with our estimates of SAR2.13bn.

  • Gross profits came-in at SAR911mn (+6.2% yoy, -1.1% qoq) compared to our estimates of SAR888mn

  • Opex in absolute terms increased 8.4% yoy to SAR633mn, but came higher than our estimates of SAR595mn.

SNB Capital
10 November 2022
Published bySNB Capital

Nahdi reported an in-line set of Q3 22 results with a net income increasing by 2.6% yoy (-5.5% qoq) to SAR254mn. This compares to the SNB Capital estimates of SAR260mn. Revenues increased by 5.7% yoy (-3.6% qoq) to SAR2.16bn and came in-line with our estimates of SAR2.13bn. The growth was led by increase in pharma revenues due to increased number of pilgrims to the holy mosques. Opex increased by 8.4% yoy to SAR633mn vs our estimates of SAR595mn while opex to sales stood at 29.3% vs 28.6% in Q3 21 and our estimates of 27.9%. This partially offsets the positive impact of higher revenue growth and improved gross margins.

  • Nahdi’s revenues increased by 5.7% yoy (-3.6% qoq) to SAR2.16bn and came in-line with our estimates of SAR2.13bn. The company attributed the yoy growth in revenue to increase in Pharma segment revenue due to increased number of pilgrims to the holy mosques.

  • Gross profits came-in at SAR911mn (+6.2% yoy, -1.1% qoq) compared to our estimates of SAR888mn. Gross margins expanded by 19bps yoy to 42.2% and came in line with our estimates of 41.6%. We believe the marginal yoy expansion in gross margins is due to favourable sales mix.

  • Opex in absolute terms increased 8.4% yoy to SAR633mn, but came higher than our estimates of SAR595mn. Subsequently, opex-to-sales stood at 29.3%, higher than our estimates of 27.9%. We believe the yoy increase and variance in opex is due to increased marketing expense to support the sales growth. As a result, operating margins contracted by 54bps yoy to 12.9% vs our estimates of 13.7%.

  • Net non-operating expenses decreased by 8.0% yoy to SAR24.7mn and was lower than our estimates of SAR32.2mn. We believe the variance is mainly driven by higher other income and lower zakat expenses.

Outlook

Based on our coverage initiation report published in April 22, we are Neutral on Nahdi with a PT of SAR162.8. We await the detailed financials to update our estimates. Growth in revenue and improved gross margins are the key highlights of the results. We believe the healthcare reforms in Saudi and company’s omnihealth strategy to drive the stock going forward. The stock is currently trading at a 2023f P/E and EV/EBITDA of 28.8x and 14.3x compared to the peers group average of 19.2x and 11.0x, respectively.