Earnings Report /
Saudi Arabia

Al-Hammadi: Strong results on high revenue and low opex

  • The revenue growth of +25.9% yoy (+12.4% qoq) is the strongest in the sector

  • The net profit increased by 61.5% yoy (+5.1% qoq) resulting in net margin increase to 23.1% in Q2 22

  • Al Hammadi announced a new dividend policy with payout ratio of 60% paid quarterly for next three years

SNB Capital
28 August 2022
Published bySNB Capital

Al Hammadi reported a strong set of results in Q2 22, with net income increasing by 61.5% yoy (+5.1% qoq) to SAR65mn. This is significantly higher than the SNB Capital and consensus estimate of SAR52mn and SAR55mn, respectively. The variation is due to a combination of higher revenues and lower operating expenses. Revenues grew by 25.9% yoy (+12.4% qoq) to SAR282mn, which we believe is due to higher patient count.

  • Revenue increased by 25.9% yoy (+12.4% qoq) to SAR282mn and was higher than our estimates of SAR246mn. The company attributed the growth to higher medical services segment revenues from Nuzha and Suwaidi hospitals. We believe this is a key positive of the results, as the improvement in the utilization of Nuzha and Suwaidi has more than compensated for the closure of Olaya hospital.

  • The revenue growth of +25.9% yoy (+12.4% qoq) is the strongest in the sector, Hammadi is the only player that remained resilient to the impact of normalization of travel. Revenues of the sector increased by 14.0% yoy (flat qoq). 

  • Gross income grew by 36.4% yoy (+13.5% qoq) to SAR109mn compared to our estimate of SAR89mn. As a result, margins expanded by 298bps to 38.7% in Q2 22 and were higher than our estimate of 36.0%. Hammadi has significantly improved it margins and is only second to Mouwasat (46.3% in Q2 22) in the sector. We believe this is another key positive of the results.

  • In absolute terms, operating expenses decreased by 17.9% yoy (+35.5% qoq) to SAR35mn in Q2 22, but was higher than our estimate of SAR23mn. The decline is due to lower provisioning expense as compared to last year. Opex-to-sales stood at 12.5% in Q2 22, but was higher than our estimate of 9.3%.

  • Operating profits increased significantly to SAR74mn in Q2 22 compared to SAR37mn in Q2 21 and was higher than our estimate of SAR66mn. Consequently, operating margin expanded to 26.2% in Q2 22 compared to 16.6% in Q2 21 but was in-line with our estimate.

  • The net profit increased by 61.5% yoy (+5.1% qoq) resulting in net margin increase to 23.1% in Q2 22 compared to our estimate of 21.3%.

  • Al Hammadi announced a new dividend policy with payout ratio of 60% paid quarterly for next three years. The policy will be applicable from Q3 22f.

Outlook

Based on our last update, we are Neutral on Al Hammadi with PT of SAR40.8. We believe higher utilisation of Al Nuzha hospital is one of the key drivers, however, a substantial level of receivables remains a cause of concern. The stock trades at 2022 P/E of 33.8x compared to peer group average P/E of 23.3x.