National Bank Financial Company (National Capital) said that the Saudi stock market is considered the most distinguished market among emerging markets, as the market moves based on its own characteristics with the support of Vision 2030 AD.
AlAhli Capital added, in a report obtained by Mubasher on Wednesday: We believe that investor optimism in general enhances the positive outlook in the Saudi market with the support of the goals of Vision 2030 and the completion of the first phase of several projects during the period 2024-2025 and benefiting from the impact of hosting major international events.
National Bank Capital expects Saudi market profits to recover after declining significantly in 2023, noting that profits are expected to grow in 2024 by 17% on an annual basis, after an expected decline of 23% in 2023, compared to an increase of 43% in 2022.
She said that the year 2023 was full of challenges, as fluctuations in the global economy affected the profits of the Saudi market, indicating that the market’s profits are expected to decline by 23% on an annual basis. This is for the first time since 2020.
Expectations for sector performance: growth for the entire market in 2024
National Bank Capital expects growth in 2024 to be for the entire market, anticipating that the increase in prices and the increase in sales volume will lead to a recovery in profits in the energy and petrochemical sectors, and growth will also be supported by sectors with great opportunities, including tourism, health care, and food production.
It is expected that banks will achieve a growth in profits for the year 2024 by 5%, and it is also expected that there will be a contraction in the net interest margin (except for Al Rajhi Bank). Due to lower interest rates.
She said: Despite this, we believe that the increase in demand for loans (an increase in 2024 of approximately 14% on an annual basis compared to an increase of approximately 11% in 2023 on an annual basis) will mitigate the impact of low interest rates, and it is expected that the cost of risks will stabilize with the support of quality. Assets.
NCB Capital expected a recovery in profits in the energy and petrochemical sectors. Supported by an improvement in global demand dynamics, this is expected to lead to a growth in Saudi market profits of approximately 17% in 2024, although, adjusting for the two sectors due to uncertainty, growth is expected to reach 11% on an annual basis.
She pointed out that the telecommunications sector is expected to achieve growth of about 3% on an annual basis, after excluding non-recurring profits achieved in 2023, expecting the sector to achieve a growth in net profit of 17% on an annual basis. Supported by the digital trend and growth of tourism, in addition to the continued impact of the sale of telecom towers.
AlAhly Capital added: With regard to the tourism and car rental sector, we expect profits to increase by approximately 29% on an annual basis. As a result of the expected increase in the number of tourists, the number of flights, and the increase in aircraft fleets.
It also expected that the healthcare sector would continue its good performance to record another year of growth, and it also expected that net income for the year 2024 would increase by 18% on an annual basis compared to 30% in 2023 on an annual basis.
National Bank Finance said that growth for the sector will be largely due to an increase in revenues by 14% on an annual basis, with support from cost efficiency. As for the pharmacy retail sector, the research company expects profits to rise by 8% on an annual basis. Supported by widening margins (especially for Al Nahdi Company).
A fair P/E is between 14 times and 17 times
She continued: Based on our expectations for profits and P/Es, we expect the index to range between 10,900 and 13,100 points in 2024, reflecting a dividend yield between 3.3% - 3.9%. The approach based on target prices indicates a fair value for the index at 12,600 points. Accordingly, we assume that the fair P/E is between 14 and 17 times, compared to the historical average of 15.4 times.
As for the main influences for the year 2024, NCB Capital indicated that they include the global economy, interest rates, oil prices, the recovery of China’s economy, major projects, hosting events, as well as IPOs.
NCB Capital expected the year 2024 to be a positive year in general, but it requires speed and flexibility in moving between sectors, saying: We prefer sectors that benefit from economic changes as we begin to shift to companies with attractive dividends, and we also prefer to shift to cyclical stocks in the second half of 2024. As global economic indicators begin to improve, we generally prefer the banking, tourism, and healthcare sectors, while Saudi Aramco, STC, Bank Albilad, Saudi Ground Services Company, Budget, and Medicine are our best choices.
Expectations of an improvement in average daily trading in 2024, supported by 3 factors
NCB Capital said that it believes that the rise in interest rates continued to affect liquidity in the stock market during 2023, as well as in 2022, as the daily average trading value decreased by 22% on an annual basis to 5.4 billion riyals last year, compared to 6.9 billion riyals. The previous year.
She added: We believe that the largest decline was during the first half of 2023 compared to the same half of the same year, and trading speed decreased to 39% in 2023 compared to 58% in 2022, and it was also lower than the 5-year average of 60%.
NCB Capital expects that expectations of lower interest rates and an increase in initial offerings and new products such as derivatives will lead to an improvement in average daily trading in 2024.
Al Ahly Capital indicated that the contribution of individual investors is still the largest in the market, although it decreased slightly to about 64% during the first 11 months of 2023 compared to 69% in 2022, indicating that the largest decline was in the contribution of large individual investors and specialized individual investors. By 24% compared to 29% in the previous year, while the contribution of individual investors decreased slightly from 39.1% to 38.7%.
Al Ahly Capital noted that, on the other hand, the percentage of foreign contributions increased from 15.7% in 2022 to 18.8% in 2023, and the net purchases of foreign investors reached 12 billion riyals during the 11 months of 2023, compared to 44 billion riyals in the previous year.
