Earnings Report /
Saudi Arabia

BinDawood Holding: Weak results due to lower gross margins

  • Revenue increased by 8.7% yoy (+3.9% qoq) to reach SAR1.18bn

  • During the quarter, BinDawood opened its first two Danube express stores at Haramain rail stations

  • Gross margins contracted by 460bps yoy to 31.0%

SNB Capital
28 August 2022
Published bySNB Capital

BinDawood reported a weaker than expected set of Q2 22 results, with net income declining by 55.4% yoy (-35.3% qoq) to SAR42.3mn. This is lower than the SNB Capital and consensus estimates of SAR81.9mn and SAR87.0mn, respectively. Revenue increased by 8.7% yoy (+3.9% qoq) to SAR1.22bn and came in-line with our estimates. The variance is driven by lower than expected gross margins due to higher discounts offered during marketing campaigns and loyalty program activities.

  • Revenue increased by 8.7% yoy (+3.9% qoq) to reach SAR1.18bn and came in-line with our estimates. We believe the yoy increase in revenue is due to higher sales during the Ramadan season and normalization of activity after all the Covid-19 related restrictions were lifted. The company was one of the beneficiaries of higher number of visitors for Umrah and Hajj due to its significant presence in Haramain region. In comparison, Othaim’s sales increased by 3.8% yoy in Q2 22 while Panda’s sales decreased by 14.8% yoy.

  • During the quarter, BinDawood opened its first two Danube express stores at Haramain rail stations. As a result, BinDawood’s total store count reached to 80 (including 52 hypermarkets and 26 supermarkets).

  • Gross margins contracted by 460bps yoy to 31.0% and came lower than our estimates of 35.0%. We believe key negative of the results is the yoy contraction and negative variance in gross margins, due to higher discounts and loyalty campaigns conducted during the Ramadan season.

  • Opex in absolute terms increased by 11.0% yoy to SAR313mn, marginally lower than our estimates of SAR320mn. Opex-to-sales stood at 25.7% in Q2 22 vs 25.1% in Q2 21 and our estimate of 26.3%. We believe the yoy increase is due to the costs associated with the opening of new stores and acquisition of AITC and Ykone.

  • Non-operating expenses stood at SAR22.4mn vs SAR22.2mn in Q2 21 and our estimate of SAR23.6mn. We believe the variance is driven by higher other income and lower lease finance costs.

Outlook

Based on our last update, we are Neutral on BinDawood with a PT of SAR105.0. Despite the weak results, we believe the company’s long-term outlook is positive supported by an increase in the number of pilgrims in Makkah and Madinah post the removal of travel restrictions and the company’s store expansion plans. The stock currently trades at 2022f P/E and EV/EBITDA of 25.3x and 10.2x vs peer group average of 24.9x and 9.5x, respectively.