We use a two-stage dividend discount model (DDM) to value ADIB, including the present value of 2026-28E dividends and a terminal value assuming 4.0% growth at an 11.25% cost of equity (based on SOTP approach accounting for the UAE vs Egypt business mix). We set a target price of AED 21.3 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 that may cause the company's shares 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. We specifically flag changes in the key UAE citizen retail segment behaviour (e.g. due to interest rates or oil prices) that could impact our expectations on ADIB. Risks emanating from international business (esp. Egypt) is also worth highlighting.