Almarai - Al Rajhi Capital
Almarai Company
Food-Diversified – Industrial ALMARAI AB: Saudi Arabia 13 October 2016
Rating
NEUTRAL
Target price
SAR60.0 (7.9% upside)
Current price
SAR55.7
Senior Research Analyst Nivedan Reddy Patlolla, CFA Tel +966 1 211 9423, [email protected] Key themes & implications Almarai reported strong margin management in Q3 2016, showing resilience of company’s core business to higher energy/ utility prices and lower subsidy. Post Q3 results, we upgraded our margin estimates over the medium term, but have marginally pared our revenue estimates, leading to revised target price of SAR60 per share (SAR59 earlier). We maintain Neutral rating on Almarai. Share information Market cap (SAR/US$)
44.52bn / 11.87bn
52-week range
41.57 - 65.57
Daily avg volume (US$)
5.23mn
Shares outstanding
800.0mn
Free float (est)
36%
Performance Absolute Relative to index
1M
3M
12M
0.2%
0.7%
-14.6%
10.0%
15.9%
14.2%
Almarai Margin trajectory seems intact for now Almarai delivered strong margin performance in Q3, which is likely to continue going forward. Management commentary was in-line with our expectations post Q3 results i.e. better margin over the medium term but marginally lower revenue growth. Management mentioned the operational efficiency program is yielding desired results and that there is further headroom to improve efficiencies. Also, the input costs are expected to remain benign in the coming few quarters. The impact of higher forage costs may start in the coming few quarters, however, it is unlikely to change the overall margin trajectory, which is likely to remain strong in our view. However, revenue growth could be marginally impacted if slowing consumer spends impact some premium segments such as fresh juice, poultry etc. We have built the above into our estimates post Q3 results and we maintain our target price of SAR60 (SAR59 previously) and Neutral rating.
Focus on Capex optimization: Given the tough macro environment and slowing consumer spending, management mentioned that there will be enhanced focus on optimizing Capex going forward, which should result in better free cash flows and aid gradual de-leveraging (positive, given increasing financing costs; net debt/ EBITDA stands at 2.8x).
Valuation: We continue to value Almarai at weighted average of DCF and relative valuation (P/E) methodologies, assigning equal weights to both. We maintain our target price (SAR60 per share) and estimates, which we have published in our flash note post the Q3 results. Our target implies 7.9% upside. We rate the stock as Neutral. Given persisting risks in the current environment, investors with a bias for safety should stick to staples with high revenue visibility. Almarai tops our pecking order of relatively safer stocks, with near complete exposure to non-discretionary products.
Risks: Sharp currency depreciation in Egypt (currency translation impact) and Brazil (which could again lead to higher competition in frozen Poultry segment) are risks to our estimates. Other risk is impact from effective cut in allowances being higher than estimates, or from fresh austerity measures which may be unveiled later.
Major Shareholder: Savola Al-Azizia United Co
36.5%
Al-Saud Sultan Mohamed
28.6%
Valuation 12/14A
12/15A
12/16E
12/17E
P/E (x)
26.6
23.2
20.7
19.0
P/B (x)
4.1
3.7
3.5
3.2
EV/EBITDA (x)
16.3
14.5
13.5
12.3
Dividend Yield
1.3%
2.0%
3.2%
3.6%
Source: Company data, Al Rajhi Capital
Performance
RSI10
Price Close
Relative to TADAWUL FF (RHS)
69.0
115.0
64.0
110.8
59.0
106.7
54.0
102.5
49.0
98.3
44.0
94.2
39.0
90.0
70 30 -10 10/15
(Contd…) 01/16
04/16
07/16
Source: Bloomberg, Company data, Al Rajhi Capital
Company summary
Period End (SAR)
12/13A
12/14A
12/15A
12/16E
12/17E
Almarai is the largest integrated dairy foods company in GCC, with a reputation for quality among the Gulf states in which it operates.
Revenue (mn) Revenue Growth Gross profit margin
11,219 13.5% 35.3%
12,606 12.4% 36.4%
13,795 9.4% 38.3%
14,951 8.4% 39.3%
16,340 9.3% 38.4%
27.9% 13.4% 1.88 4.3% 17.0% 9.4% 23.9%
27.4% 13.3% 2.09 11.5% 15.9% 10.3% 21.3%
27.9% 13.9% 2.39 14.4% 16.7% 10.3% 28.8%
28.6% 14.4% 2.69 12.2% 17.3% 10.8% 22.5%
29.6% 14.3% 2.93 8.9% 17.6% 11.0% 22.5%
EBITDA margin Net profit margin EPS EPS Growth ROE ROCE Capex/Sales
Source: Company data, Al Rajhi Capital
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
Almarai Company
Food-Diversified – Industrial 12 October 2016
Bakery segment profitability likely to inch up: Bakery segment recorded increasing profitability over the last few quarters from rising capacity utilization and product launches. We expect this trend to continue going forward, primarily from (a) capacity ramp-up from the just commissioned Hail Bakery, (b) market share gains in existing and new products (cup-cakes re-launched in Q3 2016, brown squares etc.) and (c) expansion of distribution network.
Poultry segment performance improving: H1 2016 was impacted due to dumping of frozen products, especially from Brazil. According to management, competitive situation has started to normalize during Q3, with price spread between fresh and frozen chicken reverting to normal levels. Further, mortality levels have continued to drop and were below target levels in some weeks. While the target breakeven for Poultry segment has been pegged for 2017, with improving profitability thereafter, we factor in the breakeven for 2018-end in our estimates.
Disclosures Please refer to the important disclosures at the back of this report.
2
Almarai Company
Food-Diversified – Industrial 12 October 2016
Income Statement (SARmn)
12/13A
12/14A
12/15A
12/16E
12/17E
Revenue
11,219
12,606
13,795
14,951
16,340
Cost of Goods Sold
(7,256)
(8,013)
(8,511)
(9,075)
(10,067)
3,963
4,593
5,283
5,875
6,273
S.G. & A. Costs
(2,166)
(2,595)
(3,021)
(3,342)
(3,437)
Operating EBIT
1,797
1,998
2,262
2,533
2,836
(8,092)
(9,154)
(9,945)
(10,674)
(11,508)
3,127
3,452
3,850
4,277
4,833
(1,331)
(1,454)
(1,588)
(1,743)
(1,996)
1,797
1,998
2,262
2,533
2,836
Gross Profit Government Charges
Cash Operating Costs EBITDA Depreciation and Amortisation Operating Profit Net financing income/(costs)
(254)
(216)
(267)
(340)
-
-
-
Provisions
-
-
-
-
-
Other Income
-
-
-
-
-
Other Expenses
-
(27)
Net Profit Before Taxes Taxes
1,542
Dividends
1,864
(27) 2,223
-
(30) 2,440
(42)
(71)
(66)
(80)
2
(10)
117
7
1,916
2,149
2,340
Minority Interests Net profit available to shareholders
1,755
(131)
56
(366)
Forex and Related Gains
1,502
(1,440)
(1,600)
-
-
-
-
12/13A
12/14A
12/15A
12/16E
12/17E
800.0
800.0
800.0
800.0
800.0
3.54
3.92
4.23
4.86
5.42
EPS (SAR)
1.878
2.093
2.395
2.687
2.926
DPS (SAR)
0.750
0.750
1.125
1.800
2.000
Adjusted Shares Out (mn) CFPS (SAR)
Growth
(600)
(900)
(2)
-
Transfer to Capital Reserve
(600)
1,674
(98)
12/13A
12/14A
12/15A
12/16E
12/17E
Revenue Growth
13.5%
12.4%
9.4%
8.4%
9.3%
Gross Profit Growth
12.9%
15.9%
15.0%
11.2%
6.8%
EBITDA Growth
14.2%
10.4%
11.5%
11.1%
13.0%
Operating Profit Growth
7.4%
11.2%
13.2%
12.0%
12.0%
Net Profit Growth
4.3%
11.5%
14.4%
12.2%
8.9%
EPS Growth
4.3%
11.5%
14.4%
12.2%
8.9%
Margins
12/13A
12/14A
12/15A
12/16E
12/17E
Gross profit margin
35.3%
36.4%
38.3%
39.3%
38.4%
EBITDA margin
27.9%
27.4%
27.9%
28.6%
29.6%
Operating Margin
16.0%
15.8%
16.4%
16.9%
17.4%
Pretax profit margin
13.7%
13.9%
13.5%
14.9%
14.9%
Net profit margin
13.4%
13.3%
13.9%
14.4%
14.3%
Other Ratios
12/13A
12/14A
12/15A
12/16E
12/17E
ROCE
9.4%
10.3%
10.3%
10.8%
11.0%
ROIC
10.8%
10.4%
10.9%
11.2%
11.0%
ROE
17.0%
15.9%
16.7%
17.3%
17.6%
2.7%
4.0%
3.5%
3.6%
4.0%
Capex/Sales
23.9%
21.3%
28.8%
22.5%
22.5%
Dividend Payout Ratio
39.9%
35.8%
47.0%
67.0%
68.4%
Valuation Measures
Effective Tax Rate
12/13A
12/14A
12/15A
12/16E
12/17E
P/E (x)
29.6
26.6
23.2
20.7
19.0
P/CF (x)
15.7
14.2
13.1
11.5
10.3
P/B (x)
4.4
4.1
3.7
3.5
3.2
EV/Sales (x)
4.9
4.5
4.1
3.9
3.6
EV/EBITDA (x)
17.7
16.3
14.5
13.5
12.3
EV/EBIT (x)
30.8
28.2
24.7
22.9
20.9
3.0
2.8
2.6
2.3
2.2
1.3%
1.3%
2.0%
3.2%
3.6%
EV/IC (x) Dividend Yield Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
3
Almarai Company
Food-Diversified – Industrial 12 October 2016
Balance Sheet (SARmn) Cash and Cash Equivalents
12/13A
12/14A
12/15A
12/16E
12/17E
1,811
797
2,039
300
72
992
1,346
1,281
1,634
1,678
2,545
2,769
2,836
2,935
3,595
14
1
3
18
18
5,348
4,912
6,155
4,876
5,352
16,020
17,246
19,924
22,686
24,366
479
325
198
176
176
1,310
1,350
1,009
994
994
12
2
11
18
18
110
114
74
60
60
Total Non-current Assets
17,932
19,037
21,216
23,934
25,614
Total Assets
23,280
23,949
27,371
28,809
30,965
1,683
1,821
2,039
1,602
1,602
-
-
-
-
-
Total Current Liabilities
3,720
4,043
4,807
4,589
4,594
Long-Term Debt
8,289
7,737
9,343
10,096
11,343
Current Receivables Inventories Other current assets Total Current Assets Fixed Assets Investments Goodwill Other Intangible Assets Total Other Assets
Short Term Debt Trade Payables Dividends Payable Other Current Liabilities
Other LT Payables
-
-
-
-
-
Provisions
506
538
603
669
669
8,795
8,275
9,946
10,765
12,013
622
744
560
602
604
6,000
6,000
6,000
8,000
8,000
Total Non-current Liabilities Minority interests Paid-up share capital Total Reserves
4,142
4,887
6,058
4,854
5,754
Total Shareholders' Equity
10,142
10,887
12,058
12,854
13,754
Total Equity
10,764
11,631
12,618
13,456
14,358
Total Liabilities & Shareholders' Equity
23,280
23,949
27,371
28,809
30,965
Ratios
12/13A
12/14A
12/15A
12/16E
12/17E
8,147
8,760
9,340
11,386
12,862
Net Debt (SARmn) Net Debt/EBITDA (x) Net Debt to Equity EBITDA Interest Cover (x) BVPS (SAR)
Cashflow Statement (SARmn)
2.61
2.54
2.43
2.66
2.66
75.7%
75.3%
74.0%
84.6%
89.6%
12.3
16.0
14.4
12.6
13.2
12.68
13.61
15.07
16.07
17.19
12/13A
12/14A
12/15A
12/16E
12/17E
Net Income before Tax & Minority Interest
1,542
1,755
1,864
2,223
2,440
Depreciation & Amortisation
1,331
1,454
1,588
1,743
1,996
Decrease in Working Capital Other Operating Cashflow Cashflow from Operations Capital Expenditure
(603)
(294)
1,016
(241)
356
365
413
(80)
(698)
2,626
3,279
4,881
3,645
3,641
(2,677)
(2,690)
(3,968)
(98)
(3,364)
(3,677)
New Investments
(235)
55
(18)
-
-
Others
(391)
(479)
(423)
-
-
(3,302)
(3,115)
(4,409)
(3,364)
(3,677)
Cashflow from investing activities Net Operating Cashflow
(676)
165
472
281
Dividends paid to ordinary shareholders
(499)
(598)
(599)
(900)
Proceeds from issue of shares Increase in Loans Effects of Exchange Rates on Cash
-
-
1,329
1,837
500
1,500
(16)
(13)
-
Other Financing Cashflow
1,245
(179)
(507)
2,000
(252)
Cashflow from financing activities
2,070
(1,098)
719
1,600
(192)
Total cash generated
1,393
(933)
1,191
1,881
(228)
Cash at beginning of period Implied cash at end of year Ratios Capex/Sales Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
(5)
(305)
(36) (1,440)
-
417
1,811
797
2,039
300
1,811
877
1,987
3,920
72
12/13A
12/14A
12/15A
12/16E
12/17E
23.9%
21.3%
28.8%
22.5%
22.5%
4
Almarai Company
Food-Diversified – Industrial 12 October 2016
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5
Almarai Company
Food-Diversified – Industrial 12 October 2016
Disclaimer and additional disclosures for Equity Research Disclaimer This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this research document. This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered, duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or which would subject Al Rajhi Capital or any of its affiliates to any registration or licensing requirement within such jurisdiction.
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Disclosures Please refer to the important disclosures at the back of this report.
6
Food-Diversified – Industrial ALMARAI AB: Saudi Arabia 13 October 2016
Rating
NEUTRAL
Target price
SAR60.0 (7.9% upside)
Current price
SAR55.7
Senior Research Analyst Nivedan Reddy Patlolla, CFA Tel +966 1 211 9423, [email protected] Key themes & implications Almarai reported strong margin management in Q3 2016, showing resilience of company’s core business to higher energy/ utility prices and lower subsidy. Post Q3 results, we upgraded our margin estimates over the medium term, but have marginally pared our revenue estimates, leading to revised target price of SAR60 per share (SAR59 earlier). We maintain Neutral rating on Almarai. Share information Market cap (SAR/US$)
44.52bn / 11.87bn
52-week range
41.57 - 65.57
Daily avg volume (US$)
5.23mn
Shares outstanding
800.0mn
Free float (est)
36%
Performance Absolute Relative to index
1M
3M
12M
0.2%
0.7%
-14.6%
10.0%
15.9%
14.2%
Almarai Margin trajectory seems intact for now Almarai delivered strong margin performance in Q3, which is likely to continue going forward. Management commentary was in-line with our expectations post Q3 results i.e. better margin over the medium term but marginally lower revenue growth. Management mentioned the operational efficiency program is yielding desired results and that there is further headroom to improve efficiencies. Also, the input costs are expected to remain benign in the coming few quarters. The impact of higher forage costs may start in the coming few quarters, however, it is unlikely to change the overall margin trajectory, which is likely to remain strong in our view. However, revenue growth could be marginally impacted if slowing consumer spends impact some premium segments such as fresh juice, poultry etc. We have built the above into our estimates post Q3 results and we maintain our target price of SAR60 (SAR59 previously) and Neutral rating.
Focus on Capex optimization: Given the tough macro environment and slowing consumer spending, management mentioned that there will be enhanced focus on optimizing Capex going forward, which should result in better free cash flows and aid gradual de-leveraging (positive, given increasing financing costs; net debt/ EBITDA stands at 2.8x).
Valuation: We continue to value Almarai at weighted average of DCF and relative valuation (P/E) methodologies, assigning equal weights to both. We maintain our target price (SAR60 per share) and estimates, which we have published in our flash note post the Q3 results. Our target implies 7.9% upside. We rate the stock as Neutral. Given persisting risks in the current environment, investors with a bias for safety should stick to staples with high revenue visibility. Almarai tops our pecking order of relatively safer stocks, with near complete exposure to non-discretionary products.
Risks: Sharp currency depreciation in Egypt (currency translation impact) and Brazil (which could again lead to higher competition in frozen Poultry segment) are risks to our estimates. Other risk is impact from effective cut in allowances being higher than estimates, or from fresh austerity measures which may be unveiled later.
Major Shareholder: Savola Al-Azizia United Co
36.5%
Al-Saud Sultan Mohamed
28.6%
Valuation 12/14A
12/15A
12/16E
12/17E
P/E (x)
26.6
23.2
20.7
19.0
P/B (x)
4.1
3.7
3.5
3.2
EV/EBITDA (x)
16.3
14.5
13.5
12.3
Dividend Yield
1.3%
2.0%
3.2%
3.6%
Source: Company data, Al Rajhi Capital
Performance
RSI10
Price Close
Relative to TADAWUL FF (RHS)
69.0
115.0
64.0
110.8
59.0
106.7
54.0
102.5
49.0
98.3
44.0
94.2
39.0
90.0
70 30 -10 10/15
(Contd…) 01/16
04/16
07/16
Source: Bloomberg, Company data, Al Rajhi Capital
Company summary
Period End (SAR)
12/13A
12/14A
12/15A
12/16E
12/17E
Almarai is the largest integrated dairy foods company in GCC, with a reputation for quality among the Gulf states in which it operates.
Revenue (mn) Revenue Growth Gross profit margin
11,219 13.5% 35.3%
12,606 12.4% 36.4%
13,795 9.4% 38.3%
14,951 8.4% 39.3%
16,340 9.3% 38.4%
27.9% 13.4% 1.88 4.3% 17.0% 9.4% 23.9%
27.4% 13.3% 2.09 11.5% 15.9% 10.3% 21.3%
27.9% 13.9% 2.39 14.4% 16.7% 10.3% 28.8%
28.6% 14.4% 2.69 12.2% 17.3% 10.8% 22.5%
29.6% 14.3% 2.93 8.9% 17.6% 11.0% 22.5%
EBITDA margin Net profit margin EPS EPS Growth ROE ROCE Capex/Sales
Source: Company data, Al Rajhi Capital
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
Almarai Company
Food-Diversified – Industrial 12 October 2016
Bakery segment profitability likely to inch up: Bakery segment recorded increasing profitability over the last few quarters from rising capacity utilization and product launches. We expect this trend to continue going forward, primarily from (a) capacity ramp-up from the just commissioned Hail Bakery, (b) market share gains in existing and new products (cup-cakes re-launched in Q3 2016, brown squares etc.) and (c) expansion of distribution network.
Poultry segment performance improving: H1 2016 was impacted due to dumping of frozen products, especially from Brazil. According to management, competitive situation has started to normalize during Q3, with price spread between fresh and frozen chicken reverting to normal levels. Further, mortality levels have continued to drop and were below target levels in some weeks. While the target breakeven for Poultry segment has been pegged for 2017, with improving profitability thereafter, we factor in the breakeven for 2018-end in our estimates.
Disclosures Please refer to the important disclosures at the back of this report.
2
Almarai Company
Food-Diversified – Industrial 12 October 2016
Income Statement (SARmn)
12/13A
12/14A
12/15A
12/16E
12/17E
Revenue
11,219
12,606
13,795
14,951
16,340
Cost of Goods Sold
(7,256)
(8,013)
(8,511)
(9,075)
(10,067)
3,963
4,593
5,283
5,875
6,273
S.G. & A. Costs
(2,166)
(2,595)
(3,021)
(3,342)
(3,437)
Operating EBIT
1,797
1,998
2,262
2,533
2,836
(8,092)
(9,154)
(9,945)
(10,674)
(11,508)
3,127
3,452
3,850
4,277
4,833
(1,331)
(1,454)
(1,588)
(1,743)
(1,996)
1,797
1,998
2,262
2,533
2,836
Gross Profit Government Charges
Cash Operating Costs EBITDA Depreciation and Amortisation Operating Profit Net financing income/(costs)
(254)
(216)
(267)
(340)
-
-
-
Provisions
-
-
-
-
-
Other Income
-
-
-
-
-
Other Expenses
-
(27)
Net Profit Before Taxes Taxes
1,542
Dividends
1,864
(27) 2,223
-
(30) 2,440
(42)
(71)
(66)
(80)
2
(10)
117
7
1,916
2,149
2,340
Minority Interests Net profit available to shareholders
1,755
(131)
56
(366)
Forex and Related Gains
1,502
(1,440)
(1,600)
-
-
-
-
12/13A
12/14A
12/15A
12/16E
12/17E
800.0
800.0
800.0
800.0
800.0
3.54
3.92
4.23
4.86
5.42
EPS (SAR)
1.878
2.093
2.395
2.687
2.926
DPS (SAR)
0.750
0.750
1.125
1.800
2.000
Adjusted Shares Out (mn) CFPS (SAR)
Growth
(600)
(900)
(2)
-
Transfer to Capital Reserve
(600)
1,674
(98)
12/13A
12/14A
12/15A
12/16E
12/17E
Revenue Growth
13.5%
12.4%
9.4%
8.4%
9.3%
Gross Profit Growth
12.9%
15.9%
15.0%
11.2%
6.8%
EBITDA Growth
14.2%
10.4%
11.5%
11.1%
13.0%
Operating Profit Growth
7.4%
11.2%
13.2%
12.0%
12.0%
Net Profit Growth
4.3%
11.5%
14.4%
12.2%
8.9%
EPS Growth
4.3%
11.5%
14.4%
12.2%
8.9%
Margins
12/13A
12/14A
12/15A
12/16E
12/17E
Gross profit margin
35.3%
36.4%
38.3%
39.3%
38.4%
EBITDA margin
27.9%
27.4%
27.9%
28.6%
29.6%
Operating Margin
16.0%
15.8%
16.4%
16.9%
17.4%
Pretax profit margin
13.7%
13.9%
13.5%
14.9%
14.9%
Net profit margin
13.4%
13.3%
13.9%
14.4%
14.3%
Other Ratios
12/13A
12/14A
12/15A
12/16E
12/17E
ROCE
9.4%
10.3%
10.3%
10.8%
11.0%
ROIC
10.8%
10.4%
10.9%
11.2%
11.0%
ROE
17.0%
15.9%
16.7%
17.3%
17.6%
2.7%
4.0%
3.5%
3.6%
4.0%
Capex/Sales
23.9%
21.3%
28.8%
22.5%
22.5%
Dividend Payout Ratio
39.9%
35.8%
47.0%
67.0%
68.4%
Valuation Measures
Effective Tax Rate
12/13A
12/14A
12/15A
12/16E
12/17E
P/E (x)
29.6
26.6
23.2
20.7
19.0
P/CF (x)
15.7
14.2
13.1
11.5
10.3
P/B (x)
4.4
4.1
3.7
3.5
3.2
EV/Sales (x)
4.9
4.5
4.1
3.9
3.6
EV/EBITDA (x)
17.7
16.3
14.5
13.5
12.3
EV/EBIT (x)
30.8
28.2
24.7
22.9
20.9
3.0
2.8
2.6
2.3
2.2
1.3%
1.3%
2.0%
3.2%
3.6%
EV/IC (x) Dividend Yield Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
3
Almarai Company
Food-Diversified – Industrial 12 October 2016
Balance Sheet (SARmn) Cash and Cash Equivalents
12/13A
12/14A
12/15A
12/16E
12/17E
1,811
797
2,039
300
72
992
1,346
1,281
1,634
1,678
2,545
2,769
2,836
2,935
3,595
14
1
3
18
18
5,348
4,912
6,155
4,876
5,352
16,020
17,246
19,924
22,686
24,366
479
325
198
176
176
1,310
1,350
1,009
994
994
12
2
11
18
18
110
114
74
60
60
Total Non-current Assets
17,932
19,037
21,216
23,934
25,614
Total Assets
23,280
23,949
27,371
28,809
30,965
1,683
1,821
2,039
1,602
1,602
-
-
-
-
-
Total Current Liabilities
3,720
4,043
4,807
4,589
4,594
Long-Term Debt
8,289
7,737
9,343
10,096
11,343
Current Receivables Inventories Other current assets Total Current Assets Fixed Assets Investments Goodwill Other Intangible Assets Total Other Assets
Short Term Debt Trade Payables Dividends Payable Other Current Liabilities
Other LT Payables
-
-
-
-
-
Provisions
506
538
603
669
669
8,795
8,275
9,946
10,765
12,013
622
744
560
602
604
6,000
6,000
6,000
8,000
8,000
Total Non-current Liabilities Minority interests Paid-up share capital Total Reserves
4,142
4,887
6,058
4,854
5,754
Total Shareholders' Equity
10,142
10,887
12,058
12,854
13,754
Total Equity
10,764
11,631
12,618
13,456
14,358
Total Liabilities & Shareholders' Equity
23,280
23,949
27,371
28,809
30,965
Ratios
12/13A
12/14A
12/15A
12/16E
12/17E
8,147
8,760
9,340
11,386
12,862
Net Debt (SARmn) Net Debt/EBITDA (x) Net Debt to Equity EBITDA Interest Cover (x) BVPS (SAR)
Cashflow Statement (SARmn)
2.61
2.54
2.43
2.66
2.66
75.7%
75.3%
74.0%
84.6%
89.6%
12.3
16.0
14.4
12.6
13.2
12.68
13.61
15.07
16.07
17.19
12/13A
12/14A
12/15A
12/16E
12/17E
Net Income before Tax & Minority Interest
1,542
1,755
1,864
2,223
2,440
Depreciation & Amortisation
1,331
1,454
1,588
1,743
1,996
Decrease in Working Capital Other Operating Cashflow Cashflow from Operations Capital Expenditure
(603)
(294)
1,016
(241)
356
365
413
(80)
(698)
2,626
3,279
4,881
3,645
3,641
(2,677)
(2,690)
(3,968)
(98)
(3,364)
(3,677)
New Investments
(235)
55
(18)
-
-
Others
(391)
(479)
(423)
-
-
(3,302)
(3,115)
(4,409)
(3,364)
(3,677)
Cashflow from investing activities Net Operating Cashflow
(676)
165
472
281
Dividends paid to ordinary shareholders
(499)
(598)
(599)
(900)
Proceeds from issue of shares Increase in Loans Effects of Exchange Rates on Cash
-
-
1,329
1,837
500
1,500
(16)
(13)
-
Other Financing Cashflow
1,245
(179)
(507)
2,000
(252)
Cashflow from financing activities
2,070
(1,098)
719
1,600
(192)
Total cash generated
1,393
(933)
1,191
1,881
(228)
Cash at beginning of period Implied cash at end of year Ratios Capex/Sales Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
(5)
(305)
(36) (1,440)
-
417
1,811
797
2,039
300
1,811
877
1,987
3,920
72
12/13A
12/14A
12/15A
12/16E
12/17E
23.9%
21.3%
28.8%
22.5%
22.5%
4
Almarai Company
Food-Diversified – Industrial 12 October 2016
IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report was prepared by Al Rajhi Capital (Al Rajhi), a company authorized to engage in securities activities in Saudi Arabia. Al Rajhi is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 40 Wall Street 59th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Al Rajhi. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.
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Disclosures Please refer to the important disclosures at the back of this report.
5
Almarai Company
Food-Diversified – Industrial 12 October 2016
Disclaimer and additional disclosures for Equity Research Disclaimer This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this research document. This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered, duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or which would subject Al Rajhi Capital or any of its affiliates to any registration or licensing requirement within such jurisdiction.
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Disclosures Please refer to the important disclosures at the back of this report.
6
