We use a two-stage dividend discount model (DDM) to value ADCB, including the present value of 2026-28E dividends and a terminal value assuming 3.5% growth at a 10.75% cost of equity. We set a target price of AED 15.65 based on this methodology. We cross-check this valuation using: (1) justified price to book valuation vs peers; and (2) comparable valuation relative to ADCB's historical trading range and growth prospects.

Factors which may cause the company to fail to achieve our target price include slower-than-expected economic growth and loan growth, lower oil prices, political instability or a burdensome regulatory environment. Factors which may cause the company to exceed our target price include better-than-expected economic growth and loan growth, higher oil prices, industry consolidation or a benign regulatory environment.