Cairo - Mubasher: Pharos Research set the fair value (FV) for Juhayna’s stock at EGP 8.88 and maintained their ‘overweight’ recommendation, according to a recent report.
The report showed a 22.2% year-on-year surge in revenues for the second quarter of 2017, which included Ramadan, the highest season for selling Juhayna’s products.
Gross margins dropped 27.7% in Q2-17, compared to 28.3% in Q1-17, due to promotional discounts, which were “applied in order to stimulate market growth and to fend off competition,” Pharos said.
Selling, general and administrative expenses (SG&A), which were affected by inflationary pressures, levelled up 17.9% in Q2-17
In the first half of 2017, Juhayna’s net debt amounted to EGP 2.2 billion, which was negatively affected by the Egyptian government’s 2% interest rate hike, which pressured Juhayna’s profitability and resulted in a declining net profit margin for Q2-17.
The research firm noted that volume recovery may not remain due to weak purchasing power, which will be further affected by the interest rate hike, adding that volume increase in Q2-17 was mainly due to the promotional discounts in Ramadan.
“To save margins from the partial removal of the fuel subsidy, a further wave of price hikes was applied across the consumer staples segment with Juhayna reducing discounts to wholesalers. The generally weak consumer spending will potentially halt further volume recovery over the next two quarters,” Pharos said.
