Almarai Co. -Equity Report -19-01-2012

12 Month Fair Value: SAR 114
Recommendation: Accumulate – Risk Level: 2
Last Close (17 January 2012): SAR 98.50

Almarai reported its financial results for 4Q2011 which are in line with our forecasts. The company reported revenue of SAR 2,089.3 million in 4Q2011, a 16.1% growth over the same period last year and 1.2% above our expectations.

Long life dairy, fruit juice and bakery sales all showed solid growth while poultry sales continue to pick up steam. Long life dairy experienced exceptional growth of 23.1% YoY in 4Q2011 to reach SAR 213 million, while fresh dairy sales increased by 7.9% to SAR 874 million. Bakery and fruit juice sales experienced a 23.7% and 19.7% YoY growth to reach SAR 227.5 million and SAR 225 million, respectively. Bakery has been benefiting from a greater focus on serving Riyadh and the company’s expansion efforts to export to other GCC countries. Almarai doubled its poultry sales in 4Q2011 as a result of its aggressive ongoing expansion plan.

Overall, these results are within our expectations. We continue to favor Almarai as a result of its clear strategy, strong fundamentals and solid position in key segments. We maintain our fair value of SAR 114 for Almarai’s stock, which represents a 15.7% upside potential from yesterday’s close (January 17, 2011); hence, our “Accumulate” recommendation.