Our TP of SAR 73 is based on a 5-year DCF valuation; key assumptions include WACC of 9% and TGR of 3.5%. On our numbers, the stock now trades at 18x 2026 with limited growth given current market conditions. This is in line with peers, which we find warranted.

Key risks to our investment thesis and TP include:      

Upside risks 

– Greater-than-expected market share gains could drive stronger volumes and sales growth, which in turn could translate into stronger earnings growth as operating leverage benefits kick in.      

– Wasfaty adoption can drive stronger traffic into their stores and boost LFL sales.      

– More aggressive expansion into primary healthcare centers could yield similar returns and drive stronger-than-expected growth in the long term.      

Downside risks 

– Weaker consumer sentiment and spending could erode discretionary spend on their non-drugs sales.      

– Increased competition in the sector from non-pharma players, especially in beauty products, consumer goods, and non-medicine segment.      

– Pricing pressure could weigh on margins and require further OpEx and marketing spend.