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‘New products, exports to drive Baladna’s growth’

‘New products, exports to drive Baladna’s growth’

Satyendra Pathak
Doha
Baladna has ample capacity for growth through upcoming new and value-added products as well as exports, QNB Financial Services (QNBFS) has said in its latest report.
Baladna, a key pillar of the Qatari National Food Security programme, is the undisputed leader in the Qatari dairy
market.
According to QNBFS, Baladna has spent QR2.7bn ($0.74 billion) over the last three years to expand its capacity and production capabilities.
Baladna recorded a 115.4 percent top-line growth in 2019, which may be followed by an expected 95.2 percent in 2020 and 16.8 percent in 2021 as the company plans to increase the number of Stock Keeping Units (SKUs) from 167 at the end of 2019 to 261 by the end of 2020.
“While we have not yet incorporated its potential impact in our forecasts and valuation, Baladna expects to collaborate with the Federal Land Consolidation and Rehabilitation Authority of Malaysia (FELCRA) to implement the ‘Baladna model’ in Malaysia,” the report said.
“This is an attempt to increase Malaysia’s self-sufficiency in dairy products by doubling the volume of local fresh milk production with an increase of 50-55mnLt/pa,” it said.
“Since our outperform recommendation dated May 31, 2020 at QR1.2 per share price, Baladna shares have significantly outperformed the QE Index, rising by 54.7 percent against QE Index’s 11.7 percent,” the report said.
“The strong first quarter and second quarter results, announcement of interim dividends of QR0.021 per share in April and MSCI EM Small Cap Index inclusion in May were the major catalysts for the significant outperformance,” the report said.
Adding to this, the report said, Qatar Stock Exchange also announced that Baladna will be included in its QE, QE Al Rayan Islamic and QE All Share Indices effective from October 1 this year.
“Following better-than-expected results in the second quarter, coupled with adjustments to our discounted cash flow (DCF) model for lower risk free rate, lower beta and higher growth prospects, we increase our target price for Baladna to QR1.94,” QNBFS said in the report.
“Following its strong share performance, we change our recommendation from outperform to accumulate. We maintain our positive outlook on Baladna and believe any weakness in its share price represents a buying opportunity,” the report said.
“Going forward, we are of the view that disruptions in international flights could support Baladna’s top-and-bottom-lines in the third quarter of 2020 as Qatar’s seasonal population contraction during summer months seems to be much less in 2020 against 2018 and 2019.
“Typically, Qatar’s population contracts by 10 percent in July against May due to increased outbound tourism activity, coupled with expatriates visiting their home countries. However, in 2020, July-May population contraction remained at 2.1 percent, resulting in an 11.1 percent population growth year-on-year (YoY) for Qatar in July and 2.6 percent (YoY) in August,” the report said.

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