Earnings Report /
Saudi Arabia

Al-Hammadi: Q4 22 Result Analysis | Pharmacy segment drives revenue growth

  • Revenues increased 21.6% yoy (+38.7% qoq) to SAR343mn in Q4 22

  • Strong growth in pharmacy segment (+146.3% yoy) led to robust top line growth this quarter

  • The variance in earnings is primarily due to higher-than-expected revenues

Talha Nazr
Talha Nazr

Analyst

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SNB Capital
13 March 2023
Published bySNB Capital

Al Hammadi reported a strong set of results with net income increasing 573% yoy (+29.2% qoq) to SAR74mn in Q4 22, higher than SNB capital and consensus estimates of SAR66mn, and SAR65mn, respectively. Revenues increased 21.6% yoy (+38.7% qoq) to SAR343mn in Q4 22. Strong growth in pharmacy segment (+146.3% yoy) led to robust top line growth this quarter. The variance in earnings is primarily due to higher-than-expected revenues.

  • Revenue increased 21.6% yoy (38.7% qoq) to SAR343mn and was higher than our estimates of SAR272mn. The improvement in the top line is driven by an increase in inpatient (+10.9% yoy) and outpatient volumes (+9.9% yoy). Hospital segment revenue grew by 7.5% yoy to SAR 231mn, while pharmacies segment grew by 146.3% yoy to SAR 101mn. Insurance contribution to the top line is at 46.9% in Q4 22 vs. 47.5% in Q4 21.

  • Gross income increased 18.8% yoy (+54.4% qoq) to SAR129mn, above our estimates of SAR103mn. Gross margins for Q4 22 came in at 37.6% (38.5% in Q4 21 and 33.8% in Q3 22), as compared to our estimate of 38.0%.

  • In absolute terms, operating expenses decreased sharply by 53.1% yoy (+142.6% qoq) to SAR42mn in Q4 22 and was higher than our estimate of SAR27mn. Opex-to-sales stood at 12.3% in Q4 22, higher than our estimate of 9.9%. The yoy decline in opex is due to a decrease in provisions in the current quarter compared to Q4 21.

  • Operating profits increased by 357.0% yoy to SAR87mn (+31.3% qoq) in Q4 22, which was ahead of our estimate of SAR76mn. Consequently, the operating margin expanded to 25.4% in Q4 22 compared to 6.7% in Q4 21, albeit lower than our estimate of 28.1%. The net profit increased sharply yoy to SAR74mn (Q4 21: SAR11mn) resulting in net margin increase to 21.5% in Q4 22 vs. our estimate of 24.3%.

  • The company has declared cash dividends of SAR56mn for Q1 23mn with dividend per share of SAR0.35, as compared to SAR0.30 per Q1 22.

Outlook

Based on our last update, we are Neutral on Al Hammadi with a PT of SAR40.8. We believe higher utilization of Suwaidi and Nuzha hospitals would be the key stock catalyst going forward. The stock trades at 2023P/E of 28.4x compared to the peer average P/E of 33.3x.