Shuaa advises the stock market investors to buy in the consumer sector for a decline in prices
Shuaa Capital said that buying is the best policy for investors in the Egyptian stock market during 2019, especially in view of the decline in share prices. First, strong growth in revenues; secondly, lower profitability under pressure; Therefore, the current slowdown in performance compared to the market was considered a tactical opportunity, especially with the appreciation of the pound in 2019 and expectations of a reduction in subsidies in 2020.
Consumer sector companies are vulnerable to performance, and this weakness is reflected in the yield achieved by some of the sector leaders, namely, Trans Land for Food Industries and Arab Food Industries, Domti, where the return on them was 3.3% and 4% respectively from the beginning of the year until Day, respectively, as the EGX30 index rose 7.3% in the same period.
The results of the first quarter of 2019 fell on an annualized basis due to the increase in marketing expenses to EGP 28.8 million, a decrease of 29% year-on-year, a growth rate of 32% quarter-on-quarter. To EGP 655 million, an increase of 11% year-on-year, 7% growth year-on-year, while the improvement in total profit margin to 24.6% did not prevent growth of 65 basis points year-on-year at 2 basis points backing down.
Meanwhile, the company's net profit for the first quarter of 2019 reached LE 53 million, an increase of 6% year-on-year, 7% quarter-on-quarter, while revenues on a quarterly basis declined to EGP 576 million (- 7% quarter-on-quarter, + 26% yoy), margins were pressured by higher production costs and raw materials; gross profit margin fell to 20.6% from 23.5% in Q1 2018.
According to Shuaa, Domti's management raised its marketing expenses during the first quarter of 2019 to the second highest in the company's history due to the intensification of competition. It is expected that the company's efforts to improve distribution policies will not improve the results of the first half of 2019, Is expected to begin to emerge well in the second half of 2019. However, the margin of gross profit has expanded, with Domte focused on its portfolio of high margin products, the management expects the results for the second quarter of 2019 to be weaker on an annualized basis
Under the pressure of the ongoing restructuring of the network of agents and the negative impact of the Ramadan season on the growth in sales volume, especially in the bakery sector.
As for Land Land, its management believes that the weakness in the margin level is due to the high prices of skimmed milk powder and some other production inputs since the beginning of the year. During the quarter, the company also increased its fleet for direct distribution, which in turn led to an increase in car and wage expenses. Crossing the land increased the price of white cheese twice, making the product 5% higher than before. Revenues for the juice and milk sectors were approved in 2019, with total sales of milk and juice reaching EGP 33.5 million compared to EGP 15 million in the first quarter of 2018.
Landland aims to improve its purchasing policy, raise the price of its new products such as milk and juice, and launch the mozzarella cheese production line in the second half of 2019. Regardless of the decline in profits, Land believes that sales of white cheese will increase by 10 percent for the whole year.
(tagsToTranslate) Economy News (t) Consumer Sector (t) Stock Exchange (t) Stock Exchange (t) Stock Exchange News
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