Riyadh - Mubasher: Aljazira Capital said that United International Transportation Company (Budget Saudi Arabia) leads the Saudi car rental market with the largest fleet of vehicles after acquiring Alam Al Sayarat Company.

The research firm added, in a report seen by Mubasher on Monday, that the acquisition will put more pressure on margins in the near term than expected, but the company may benefit from its large fleet size and expanding market amid rising demand.

She noted that the company's market expansion and recovery in demand for car rentals are expected to drive revenue growth at a compound annual growth rate of 10.2% over the period 2024-2029.

She continued: "Budget remains well-positioned to expand its fleet in the future despite high debt. However, declining margins in the Auto World business will negatively impact the company's profit margins."

Aljazira Capital expects the impact on gross profit margins, operating profit, and net profit to be greater than previously expected due to acquisition completion and reclassification costs.

However, margins are expected to gradually improve with cost savings, and therefore, net profit is expected to grow at a CAGR of 15.2% over the period 2024-2029.

She added that based on our expectations after the review, we have reduced the target price for Budget's stock to SAR 84 per share (from SAR 96 per share previously) and continue to recommend it on a "Neutral" basis.

The research firm noted that it believes the company's current stock valuation (2025 P/E of 17.2x) reflects most of the gains from the acquisition and future growth prospects.

Budget Saudi Arabia's 2024 results revealed a net profit increase to SAR 311.69 million, compared to SAR 277.21 million in 2023, a 12.44% increase.

The company attributed the increase in net profit to improved operating rates in short- and long-term leasing, along with an increase in fleet size.