Net income – SAR29mn, +15% Y-o-Y, -49% Q-o-Q, -22% vs. EFGe Gross profit – SAR50mn, -1% Y-o-Y, -39% Q-o-Q, -22% vs. EFGe Net operating profit – SAR30mn, +10% Y-o-Y, -50% Q-o-Q, -21% vs. EFGe   National Medical Care Co. (CARE) reported its preliminary 3Q16 results, showing earnings growth of 15% Y-o-Y to SAR29mn (below estimate) despite 7% decrease in revenue to SAR197mn. The company cited that the Y-o-Y growth in earnings was attributed to: i) enhanced operational efficiency; ii) cost rationalisation; iii) better contractual terms with major clients; and iv) higher other income. Earnings dropped heavily 50% Q-o-Q due to seasonality (holidays season). Gross profit came in flattish Y-o-Y at SAR50mn, as the drop in revenue was offset by a decrease in COGS. Gross profit came in 22% below our estimate on lower-than-expected revenue (19% vs. EFGe) and higher than expected costs. Meanwhile, EBIT grew 10% Y-o-Y (-21% vs. EFGe) on lower SG&A expenses (-13% Y-o-Y), and SG&A-to-sales ratio improved 3pp to 10.5%, likely due to improved operational efficiency and cost rationalisation, leading to 2pp widening in EBIT margin to 15.1%. The revenue drop was a negative surprise to us, as we were expecting sustained double-digit revenue growth in 3Q16 (+16%), especially that the company has expanded its number of beds and renewed contract with GOSI at better prices. (Company disclosure, Tarek El-Shawarby, Adham El Badrawy)   National Medical Care: SAR64.85 as of 20 October 2016, Rating: Neutral, FV: SAR65.00 per share, MCap: USD776mn, CARE AB / 4005.SE