Riyadh - Mubasher: Aljazira Capital said that the expansion of operations and diversification of products places Al Majid Al Oud Company among the biggest beneficiaries of...

Positive factors favouring the growth of the sector.

The research company added, in a report seen by Mubasher today, Sunday, that the company is expected to benefit from the increase in disposable income, the favorable demographic structure, the growth of recreational and religious tourism, and innovations in the perfume sector in the Kingdom.

Aljazira Capital expects that the operational maturity of the branches and the increase in average sales per branch, along with the increase in operating leverage, will lead to an improvement in the gross profit margin, operating profit and net profit.

She said: “We expect the gross profit margin to expand during the period 2023-2028 to about 68%, the operating profit margin to expand to 22.7%, and the net profit margin to expand to 21.1%.”

The research firm noted that strong cash flows and lower capital expenditure requirements are expected to deliver a healthy dividend yield of 2.9% in 2024, which is expected to rise to 9% by 2028.

She pointed out that the strength of the company's brand is represented by the increase in the average number of daily visitors by 49% during the past 12 months, despite the competition in the perfume sector.

She also pointed out that the company was able to launch products that suit different customer tastes, which led to the spread of its portfolio of 132 brands to become one of the well-known companies in the Kingdom.

She said the company's strategy to diversify products and expand its branch network is expected to increase its market share from 5.2% in 2022 to an expected share of 8.6% by 2027.

Aljazira Capital expects to add 86 branches by 2028, bringing the total number of the company’s branches to 372, and an increase in average sales.
For each branch, from 2.68 million riyals to 3.54 million riyals by 2028, which will lead to sales growth at a CAGR of 11.4% for the period 2028-2023 to reach about 1.32 billion riyals.

The research firm initiated its coverage with an “Overweight” recommendation on Al Majed Al Oudi stock, with a target price of SAR 171.3 per share.

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