Net income: SAR292.5mn, +16% Y-o-Y, +2% Q-o-Q, +7% vs. EFGe
Revenue: SAR2,136.9mn, +7% Y-o-Y, +11% Q-o-Q, 0% vs. EFGe
Gross profit: SAR320mn, +4% Y-o-Y, -5% Q-o-Q, -2% vs. EFGe
Operating profit: SAR300.7mn, +19% Y-o-Y, +3% Q-o-Q, +8% vs. EFGe
Jarir Marketing reported preliminary 4Q18 numbers, with solid earnings growth of c16% Y-o-Y, on a combination of higher revenue and lower SG&A expenses. Earnings were 7% ahead of our estimate on the positive SG&A cost surprise. Earnings were almost flat Q-o-Q (+2%), despite 3Q being a high base quarter, due to the back-to-school season. Excluding last year’s cSAR9mn loss on sale of PPE, recurring earnings were up 12% Y-o-Y, while 2018’s recurring earnings increased c10% Y-o-Y. Top-line grew 7% Y-o-Y and was exactly in line with our estimate, continuing the solid growth trend that began in 2Q18, which the company attributed to strong electronics sales, driven mainly by smartphones. The company opened two showroom in the quarter (five in 2018), with store count at 55 as of end-2018 vs. 50 a year ago. Gross margin slightly contracted Y-o-Y (-34bps) to 15.0% (-0.24pp vs EFGe), with gross profit rising 4% (-2% vs. EFGe); however, EBIT margin expanded +1.46pp Y-o-Y (+1.3pp vs EFGe), as SG&A costs (net of other income) were down c64% Y-o-Y (-c63% vs. EFGe) as SG&A expenses in 4Q17 were elevated (+84% Y-o-Y, due to increased promotional activity, likely to spur pre-VAT purchases). EBIT grew 19% Y-o-Y and was 8% ahead of our estimate.
The results set is fairly strong, in our view, especially given that 4Q17 was a relatively high base (earnings +17% Y-o-Y), due to increased consumer purchases, ahead of the implementation of VAT in January 2018. The company continues to deliver solid top-line growth, has been able to broadly maintain its margins and has best-in-class profitability and return metrics. We reiterate our Buy rating on Jarir.
Hatem Alaa, Nada Amin
Jarir Marketing Co.: SAR154.60 as of 29 Jan 2019, Rating: Buy, TP: SAR163.00/share, MCap: USD4,947mn, JARIR AB/4190.SE