Report
Victor Dima

Shoprite Holdings (BUY, TP ZAR 205/share) H1 17A results indicates 24bps expanion in EBIT margin


  • As per the company’s January trading update SHP group revenue grew by 14.0% y/y, decelerating from H2 16A (20.1% y/y) driven by i) a strong performance from Non-RSA supermarkets (17% of revenue) growing at >50% in constant currencies and ii) best-in class SA LfL growth of 7.4% y/y.
  • Gross margin expanded by c.20bps y/y to 23.4% vs ACe: 20.8%. The difference is driven by a restatement in the prior year by the company due to retrospective changes in accounting policies related to the treatment of advertising rebates.
  • Group Trading profit margin expanded by 24bps y/y to 5.5% beating ACe: 5.4%, helped by Non-RSA supermarket’s (17% of EBIT) 100bps EBIT margin expansion to 5.8% (ACe: 4.9%)
  • Group HEPS increased by 15.6% y/y to ZAR 4.63/share below ACe: ZAR 4.84/share) which was negatively impacted by higher exchange rate losses of ZAR 188m.


Underlying
Shoprite Holdings SJ

Provider
Arqaam Capital
Arqaam Capital

Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa. 

Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research. 

Analysts
Victor Dima

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