Earnings before minority interest: SAR68.7mn, +1% Y-o-Y, -6% Q-o-Q, -6% vs. EFGe Revenue: SAR457.1mn, -8% Y-o-Y, -1% Q-o-Q, -3% vs. EFGe Gross profit: SAR180mn, +5% Y-o-Y, -5% Q-o-Q, -2% vs. EFGe Operating profit: SAR72.2mn, +0% Y-o-Y, -4% Q-o-Q, -4% vs. EFGe   SADAFCO’s posted KPIs for 3Q16/17 (ending 31 Dec. 2016) showing muted pre-minority earnings growth of only 1% Y-o-Y (6% lower than EFGe) as top-line growth was challenged by stern competition and SG&A expenses surged on promotional activity. Revenue dropped for the third quarter in a row (-8% Y-o-Y; -3% vs. EFGe), with the company citing lower consumer spending and increased price promotions by competition. SADAFCO’s market share increased in long-life milk, ice cream and tomato paste, as per the company’s disclosure. Gross margin expansion remained solid, adding c4.7pp to 39.4% (versus EFGe of 39.0%) on sustained benefits from lower SMP prices (the company’s main input). Accordingly, gross profit rose 5% Y-o-Y (-2% vs. EFGe). EBIT margin also widened a tamer c1.3pp to 15.8% (vs. EFGe of 16.0%) as SG&A costs grew 8% Y-o-Y as selling and distribution expenses rose 17.3% as the market witnessed aggressive discounting campaigns. EBIT was thus flat Y-o-Y and 4% below our estimate.   This is the first (slight) earnings miss for SADAFCO in quite some time. While margin gains on low SMP prices continued, continued revenue weakness and some pick up in SG&A costs due to competitive pressures weighed down on numbers. This could be a challenge as the company starts utilising more expensive SMP inventory at current prices in coming quarters. We have a Buy rating on valuation grounds. (Company disclosure, Hatem Alaa, Nada Amin)   SADAFCO: SAR118.79 as of 12 January 2017, Rating: Buy, TP: SAR164.00 per share, MCap: USD1,030mn, SADAFCO AB / 2270.SE