Earnings Report /
Saudi Arabia

Extra: Strong Q1 21 results on higher sales and margins

  • Sales increased 10.8% yoy (-30.2% qoq) to SAR1.4bn. This is the highest Q1 revenue on record

  • Gross margins expanded by 127bps yoy to 19.2% in Q1 21 and came higher than our estimates of 18.4%

  • Opex efficiencies also supported profitability in Q1 21, with opex in absolute terms decreasing -3.2% yoy to SAR165mn

SNB Capital
12 April 2021
Published by

Extra reported a strong set of Q1 21 results, with a net income of SAR81mn, increasing by 134% yoy (-20.3% qoq). This compares to the NCBC and consensus estimates of SAR41mn and SAR42.1mn, respectively. Revenues increased by 10.8% yoy to SAR1.4bn and were higher than our estimates of SAR1.3bn. We believe the deviation was primarily due to higher than expected growth in the consumer financing business. Gross margins expanded 127bps yoy to 19.2% (vs our estimates of 18.4%).

Key highlights:

  • Sales increased 10.8% yoy (-30.2% qoq) to SAR1.4bn. This is the highest Q1 revenue on record and was higher than our estimates of SAR1.3bn. We believe the variance is mainly due to higher than expected consumer financing sales.

  • Gross margins expanded by 127bps yoy to 19.2% in Q1 21 and came higher than our estimates of 18.4%. We believe the variance and yoy improvement are driven by higher contribution of consumer financing business and lower discounts.

  • Opex efficiencies also supported profitability in Q1 21, with opex in absolute terms decreasing -3.2% yoy to SAR165mn and came lower than our estimates of SAR179mn. Opex-to-sales stood at 12.1% in Q1 21 vs 13.8% in Q1 20 and our estimates of 14.2%. Non-operating expenses were broadly flat yoy at SAR16mn, marginally higher than our estimates of SAR14mn. 

  • The profitability of the consumer finance subsidiary was one of the key earnings drivers during Q1 21, with the company recording a net profit of SAR20.2mn in Q1 21 vs net loss of SAR4mn in Q1 20.

Based on our last published update in December 2020, we are Neutral on Extra with a PT of SAR90.8.

Since then, the stock has rallied +46%. Strong growth in the consumer financing business is a key positive of the results. Moreover, sector consolidation and the housing boom are also key growth drivers going forward. However, we do highlight the company benefited from the Covid-19 related travel restriction (particularly in Q2 20) and travel normalisation may potentially restricted profitability growth in the near term. We await detailed financials to update our rating and PT.