Contracts With Kaharama And Acquisitions Like Ci-San Will Strengthen Future Prospects

Key Takeaways

• Strategic acquisitions and investments in new capabilities will likely drive revenue growth and improve margins in key sectors.
  
• Focus on sustainability and national development strategies enhances long-term growth opportunities and profitability.
  
• Revenue and profit are vulnerable to dependency on large contracts, operational challenges, and rising costs across several segments.

Catalysts

Engages in the property, trading and distribution, industrial manufacturing, and managed services businesses in Qatar and internationally.

• Significant contract wins, such as those with Kaharama and major regional energy and construction projects, are expected to drive future revenue growth in Aamal's Industrial Manufacturing segment.
  
• Investments in new capabilities and expansions, including Elsewedy and Doha Cables advancing their offerings to meet transmission network requirements, will likely enhance revenue growth and improve margins.
  
• Strategic acquisitions, like Ci-San and increased ownership in Frijns Middle East, underscore confidence in growth prospects and are expected to positively impact earnings as demand grows in key sectors.
  
• Operational improvements and expansions in the Trading and Distribution segment, such as the introduction of new brands and digital services, suggest potential revenue growth and margin improvements.
  
• The focus on sustainability and ESG initiatives, along with the Qatari government's national development strategies, are poised to unlock opportunities for long-term growth and enhance both revenue and profitability.

Aamal Company Q.P.S.C Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aamal Company Q.P.S.C's revenue will grow by 7.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 20.6% today to 19.0% in 3 years time.
• Analysts expect earnings to reach QAR 500.0 million (and earnings per share of QAR 0.07) by about March 2028, up from QAR 432.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.4x on those 2028 earnings, up from 13.2x today. This future PE is greater than the current PE for the QA Industrials industry at 12.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.6%, as per the Simply Wall St company report.

Aamal Company Q.P.S.C Future Earnings Per Share Growth

Risks

• The completion of Aamal Cables contract led to a significant 52% reduction in revenue for the Industrial Manufacturing segment, highlighting potential fluctuations in revenue due to reliance on large contracts.
  
• The subdued performance of Aamal Medical, which contributed to a 10% decline in net profit for the Trading and Distribution segment, suggests risks to overall earnings from operational challenges or delivery delays.
  
• An increase in impairment provisions and utility costs impacted the Property segment's net profit, indicating potential risks to net margins from rising operational costs.
  
• Ongoing renovations in Aamal Real Estate led to a drop in occupancy rates, affecting revenue and net profits; this dependency on full occupancy for stable revenue could pose risks if market conditions change.
  
• The Managed Services segment faced revenue pressure from competition, inflation, and increased labor costs, posing risks to net margins and profitability despite temporary performance improvements.

Valuation

• The analysts have a consensus price target of QAR1.04 for Aamal Company Q.P.S.C based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be QAR2.6 billion, earnings will come to QAR500.0 million, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 19.6%.
• Given the current share price of QAR0.91, the analyst price target of QAR1.04 is 12.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.