HC Brokerage raises target price of Juhayna, Domty

CAIRO – 24 June 2018: HC Brokerage raised the target price of Juhayna and Domty and maintained the overweight rating for both companies.

HC Brokerage clarified in a report that the target price of Juhanya increased by 36 percent to LE 16.1 per share.

As per Domty, the target price reached LE 13.9 per share, with an increase of 29 percent.

“Market indicators suggest there was broad-based market slowdown in 2017 that was more aggressive than we initially anticipated,” equity analyst in the Consumers Sector at HC Brokerage, Noha Baraka, said.

“To us, the aggressive price hike environment has posed a drag on volumes, which indicates that demand was more elastic to price increases,” She added.

Baraka noted that although HC expects to see an improvement throughout 2018, as already evident by Juhayna and Domty's results of the first quarter of 2018, the expected inflationary pressures stemming from another round of subsidy cut in July will likely further weigh on private consumption.

The report also expected the volume to be fully restored by the beginning of 2019, as inflation declines to an average of 12.8 percent from 15 percent this year in the upcoming round of economic reform measures and the fuel and electricity subsidy adjustments.

“We still expect Domty to stand a better chance than Juhayna in terms of volume recovery despite fierce competition in part due to its cheese products, which are a low-cost, relatively high-protein food,” Baraka said.

“This is in addition to the company ramping up utilization rates of its Domty Plus brand, which saw great acceptance from customers and secured bulk sales to one of its big clients,” Noha added.

The report forecasted that, on the short term, Domty’s margins will recover faster than Juhayna’s on a more favorable skimmed milk powder cost outlook, which is a key pillar for margin expansion.

Established in 1984, Arabian Food Industries Co (Domty) is a public company, listed on Egyptian Exchange (EGX) since December 2015. It operates within the food, beverage & tobacco sector focusing on packaged foods & meats. It has one subsidiary operating Egypt.

Juhayna Food Industries also operates within the food, beverage and tobacco sector focusing on packaged foods and meats. It was established in 1995 and has six subsidiaries.