AlJazira Cap says Mobily Q4 2020 profit exceeds expectations, maintains 'Overweight' rating

Mobily branch office

Etihad Etisalat Co.’s (Mobily) net profit of SAR 246 million for the fourth quarter of 2020 came above AlJazira Capital and consensus estimates of SAR 220 million and SAR 182 million, respectively.

The brokerage firm said in an earnings review that the deviation in net income from its estimate was primarily because of the higher-than-expected revenue and operating margin, along with lower Zakat expenses, despite the continuous pressure on some segments due to COVID-19 pandemic.

The pressure on revenues is expected to continue for Q1 2021 due to the delay in easing restrictions on international travels and recent tightening of rules for visitors from specific countries.

The expansion of the subscriber base and strong growth in data service and wholesale revenue are likely to maintain the company's overall revenue growth.

In addition, the marked improvement in margins during the past two quarters is a positive sign for Mobily, which in turn, will support its net profit.

Lower financing costs is forecast to continue to support 2021 net profit, due to lower interest rates and the refinancing of a major part of the company's debt.

Mobily is projected to achieve a net profit of SAR 849 million during 2021, an increase of 8% year-on-year (YoY).

AlJazira Capital maintained its recommendation as "Overweight", with a target price (TP) of SAR 32 per share for Mobily.