Leumi Partners leaves their recommendation for the supermarket chain’s stock
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At “excess return” and raising the target price to NIS 26.6 per share – an upside of about 11% relative to the base price of the share this morning. According to Maayan Beck-Marom, Leumi Partners’ retail analyst“Shufersal, like the other players in the food retail sector, is enjoying an increase in consumption in the private chains since the outbreak of the corona virus and we expect that it will continue to enjoy this trend in the coming months due to a lack of eating in restaurants and hotels.”
Beck-Merom notes that in the first quarter of the year, which was affected by food storage by the public in March, Shufersal recorded an 18% increase in sales and a 0.5% improvement in profitability. June recorded the entire consumer goods market an increase in sales volume of over 4%.
In addition, Beck-Merom estimates that Shufersal has the potential for future improvement in profitability due to two levels: reaching an operational balance in Be in the fourth quarter of the year, and in the longer term in 2021-2022 improvement in retail sector profitability due to the entry of the two Which Shufersal invests significant sums in their establishment.
The following is a summary of Beck-Merom’s review:
Corona has a positive impact on society
Shufersal, like all players in the food retail sector, is enjoying an increase in consumption in private chains since the outbreak of the corona virus. In March, the consumer goods market in Israel showed a jump of about 40% compared to sales data in the previous year due to food storage made by the public, but also afterwards due to trends of minority eating in restaurants and hotels, and when the Israeli public is completely barred from traveling abroad. Sales data Monthly increase in excess of 4% compared to corresponding periods last year.
Shufersal showed a growth rate of 18.5% in the first quarter, with the company noting that the contribution of the corona crisis is estimated at NIS 320-360 million. The increase in sales was reflected in both sales in the same stores and in sales per square meter, both of which increased by approximately 17%. The loss in Be was reduced in the first quarter to NIS 8 million. The operating profit ratio in the first quarter improved to 4.1% (excluding Standard 16). 3.6% in the corresponding quarter last year, with the improvement due to the strong sales data for this quarter, an improvement in the profitability of the credit sector and a reduction in the loss in Be.
Potential for improving profitability in the medium term Two levels
Shufersal is expected to reach an operating balance in Be in the fourth quarter of this year, when the company confirmed this forecast in the last quarter. In addition – in the next two years, the two automatic marlogs that will serve the online activity are expected to open, Marlogs that Shufersal invests considerable sums in their establishment, and they are expected to contribute to improving the profitability of the online activity when they enter full activity.
Sale of control by DKSH
The sale of control by DSKS, which took place about a week ago, stems solely from the liquidity difficulties of the IDB Group, and its completion removes the cloud of selling control of the company that was in the background and even clouded the share price for many months.
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