Almarai Company
2280 · Saudi Exchange (Tadawul) · Consumer staples, packaged foods · Reporting currency SAR · As of 9 August 2026
A durable food business in the middle of the largest building programme in its history. The brand is real, the cold chain is real, and so far the capital has not earned its keep.
Triggered at or below SAR 32.20, or by two quarters with capital spending under 12% of revenue and operating margin above 14.0%. Objective is defensive Gulf consumer exposure over a three to five year holding period. Allocation band 0 to 2%, set by the drawdown implied by the bear case rather than by liquidity.
| Metric | Value | Metric | Value |
|---|---|---|---|
| Market capitalisation | SAR 48.5bn | Trailing price to earnings | 19.5x |
| Shares outstanding | 1,000m | Price to book | 2.33x |
| EV / EBITDA | 12.2x | Net debt / EBITDA | 2.5x |
| Dividend yield | 2.4% | Dividend per share, 2025 | SAR 1.15 |
| Return on equity, 2025 | 12.0% | Return on invested capital, 2025 | 8.9% |
| Average daily value, 3m | SAR 43.0m (USD 11.5m) | Beta against TASI | 0.89 |
| 52-week range | SAR 38.18 – 54.05 | Held outside 5%+ holders | 54.8% |
Source: Argaam company page, 9 August 2026 (Tier 3) for price, traded value and beta; StockAnalysis, 21 May 2026 (Tier 4) for the 52-week range; Almarai Integrated Annual Report 2025, audited by KPMG Professional Services (Tier 1) for everything computed. Enterprise value adds net debt of SAR 11,966m and lease liabilities of SAR 550m at 31 December 2025. Trailing earnings are for the twelve months to 30 June 2026. The riyal has been pegged to the dollar at 3.75 since 1986.
Fair value from a free cash flow to the firm model discounted at 8.4% with 2.5% terminal growth. The low end is the base case at 8.9%, the high end the same case at 7.9%. The anchor of SAR 40.30 is the base case itself, not the midpoint of the range. Calculated by the author.
Three reasons to look
- The programme could finish and the cash return. Capital work in progress of SAR 5.8bn is 13% of gross fixed assets and earns nothing today. If it commissions and spending falls to the guided 7 to 8% of revenue, free cash flow swings by billions inside two years.
- The cold chain is a genuine moat in dairy. Delivering fresh milk daily to tens of thousands of outlets takes a fleet, depots and route density a new entrant cannot rent. Dairy is 58% of revenue and carries the group.
- Pricing power survived the grain spike. Gross margin went 31.9% in 2021, 30.0% in 2022, back to 31.2% in 2025, with operating margin up from 12.7% to 13.9% across the same window.
Three major risks
- Capital spending has not normalised. Guided to 7 to 8% of revenue, delivered 19.9% in 2025. Holding it at 15% rather than 13% costs about SAR 6.60 a share.
- Incremental capital earns less than the base. Return on invested capital went from 10.0% to 8.9% while capital investment went from 7% of revenue to 20%. The cost of capital is 8.4%.
- Poultry is a commodity fight. Almarai adds 70% more birds into a segment where it is already second at 21.2% of fresh chicken and every rival expands on subsidised credit.
Business overview
Almarai makes and delivers fresh and long-life food. Milk, laban, yoghurt, cheese and cream are the core. Around those sit juice, bread and pastries, fresh chicken, and a set of newer lines: bottled water, seafood, red meat and ice cream. Almost everything is a low-priced item bought weekly, so volume follows population, incomes and how often people eat out rather than any single contract.
The company owns most of the chain behind the product. It runs its own dairy herds, its own poultry farms, its own plants, and its own fleet of refrigerated trucks reaching tens of thousands of shops. Feed comes from 27 arable farms in the United States and Argentina, because Saudi law restricts growing fodder domestically. That control is why the margin holds through cost shocks, and it is also why the business needs so much capital.
Source: Almarai Integrated Annual Report 2025. Tier 1. Growth on 2024 was 4.5% in dairy, 3.5% in poultry, 4.8% in bakery and 4.3% in juice.
Poultry is the expansion management is selling, and in 2025 it grew 3.5%, the smallest rate of the four main lines. Dairy, the part being asked to fund the build, grew 4.5% and is 58% of revenue. The new lines are 3.2% of revenue and management says plainly they do not yet move group results.
How it makes money
Gross margin was 31.2% in 2025. The largest cost is material at SAR 9.27bn, then people at SAR 2.40bn inside cost of sales and SAR 1.89bn more in selling and distribution. Utilities cost SAR 597m, up 26% on the year. Two credits flatter the cost line: SAR 756m of biological asset appreciation, the accounting gain on rearing the herd, and SAR 246m of government grants. Together they are 6.6% of cost of sales and both sit outside management's control.
| Metric | Value |
|---|---|
| Employees in the Gulf | 46,997 |
| Material consumed | SAR 9,270m |
| Wages inside cost of sales | SAR 2,396m |
| Arable farms overseas | 27 |
Source: Integrated Annual Report 2025. Tier 1. Employees are the Gulf workforce disclosed in the retirement benefit note.
What actually moves earnings
There is no customer concentration risk of the usual kind. Almarai sells through supermarkets, small grocers and, increasingly, restaurants and cafes, and no single buyer is large enough to be disclosed. The concentration sits on the input side instead. Feed grain, whether bought or grown on the group's own overseas farms, sets the cost of both milk and chicken. Diesel sets the cost of the fleet, and the company told the market in January 2026 that a diesel price rise would add about SAR 70m to 2026 costs. Electricity and water are regulated tariffs.
Revenue is recurring in the useful sense: repeated weekly purchases of branded staples, not contracts that can be lost at renewal. Almost all of it is spot-priced, so Almarai can reprice, but only as fast as rivals and regulators allow. Three drivers move earnings: litres and birds sold, the feed and diesel bill, and the mix between fresh and discounted frozen product.
Industry and competitive position
Management frames the growth case on poultry: a Saudi market of about 1.6 million tonnes, of which Almarai serves around 14%, with capacity rising from roughly 250m to 450m birds for about SAR 7bn. That figure comes from the company, so it needs testing.
| Measure | Company view | Built from reported figures | Gap |
|---|---|---|---|
| Saudi poultry market | About 1.6m tonnes | About 1.39m tonnes | Company figure is 15% higher |
| Almarai share | About 14% of the market | 21.2% of fresh poultry | Runway looks smaller once the slice is matched |
Bottom-up market size: Saudi broiler production of about 1.0m tonnes in 2024 at a stated 72% self-sufficiency implies consumption near 1.39m tonnes (Sukuk Capital sector report via Saudi Poultry Magazine, 2025, Tier 3). Brand share in fresh poultry meat by volume from the Entaj IPO prospectus and a Euromonitor study, reported February 2025. Company figures from the CFO review, Integrated Annual Report 2025.
Source: Entaj IPO prospectus and a Euromonitor study, reported by Saudi Poultry Magazine, February 2025. Tier 3. Shares are of fresh poultry meat by volume and exclude the frozen aisle, where BRF's Sadia brand is the leading name.
Measured across all poultry, including frozen, Almarai looks like a 14% player with room to run. Measured in the fresh chicken aisle where it actually competes, it is already second. Balady is adding 200m birds, JBS said in January 2026 it would double Jeddah output, and the Agricultural Development Fund subsidises up to 70% of qualifying projects, which lowers the cost of entry for every competitor at once. Almarai's own chief financial officer describes the near-term market as carrying excess supply with pricing tighter as a result.
Dairy is the stronger position
In dairy, Almarai is the regional leader and the competitive set is thinner: SADAFCO in long-life milk, NADEC, Al Safi Danone, and a long tail of small producers. The barrier is not technology. It is the cold chain. Delivering fresh milk daily to tens of thousands of outlets across the Gulf takes a fleet, depots and route density that a new entrant cannot rent. That is a real advantage and it is the reason dairy carries the group.
Pricing power, tested
The honest test is whether the company raised prices through an input cost cycle and kept the margin. It roughly did. Gross margin was 31.9% in 2021, dipped to 30.0% in 2022 when grain prices spiked, and recovered to 31.2% in 2025. Operating margin improved from 12.7% to 13.9% over the same period. So pricing power exists, but it is the power to hold a margin, not to expand one.
The mechanism is cost position and distribution density, not brand alone. An owned cold chain reaching tens of thousands of outlets daily is genuinely hard to copy. It protects dairy well. It protects poultry much less, because chicken is bought on price and every rival is adding subsidised capacity into the same segment.
Financial performance
| SAR million | 2021 | 2022 | 2023 | 2024 | 2025 | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|---|---|---|
| Revenue | 15,850 | 18,722 | 19,576 | 20,980 | 22,065 | 23,830 | 25,498 | 27,156 |
| Revenue growth | 18.1% | 4.6% | 7.2% | 5.2% | 8.0% | 7.0% | 6.5% | |
| Operating profit | 2,015 | 2,276 | 2,694 | 2,995 | 3,060 | 3,146 | 3,442 | 3,802 |
| Operating margin | 12.7% | 12.2% | 13.8% | 14.3% | 13.9% | 13.2% | 13.5% | 14.0% |
| Net profit | 1,564 | 1,760 | 2,049 | 2,313 | 2,456 | 2,475 | 2,696 | 3,004 |
| Earnings per share, SAR | 1.59 | 1.79 | 2.08 | 2.34 | 2.48 | 2.47 | 2.70 | 3.00 |
History from the Integrated Annual Report 2025 five-year summary (Tier 1). Forecast columns are the author's estimates and every input is printed in the assumption block in section 06. Forecast net profit assumes net finance cost of SAR 520m, 560m and 570m. Zakat is levied on a base built from equity and liabilities, not on profit, so it is modelled as a charge rather than a tax rate.
Additions to property, plant and equipment against revenue, Integrated Annual Report 2025. Tier 1. Management guidance across the period was 7 to 8% of revenue. Including intangibles and livestock net of disposals, total capital investment was 22.9% of revenue in 2025.
| SAR million | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Operating cash flow | 4,915 | 3,829 | 4,483 | 6,028 | 5,463 |
| Additions to property, plant and equipment | (1,364) | (1,334) | (2,530) | (3,822) | (4,385) |
| Free cash flow | 3,101 | 1,842 | 1,179 | 1,531 | (503) |
| Free cash flow against net profit | 198% | 105% | 58% | 66% | -20% |
| Dividends declared for the year | 1,000 | 1,000 | 1,000 | 1,000 | 1,150 |
| Payout against earnings | 64% | 57% | 49% | 43% | 47% |
Source: Integrated Annual Report 2025. Tier 1. Dividends are declared amounts and payout ratios are the company's own. Cash paid was SAR 987m in 2024 and SAR 986m in 2025.
Almarai earned SAR 2,456m, spent SAR 4,385m on plant and SAR 1,042m on livestock, paid SAR 986m of dividends and borrowed SAR 2.3bn more. Across five years cumulative free cash flow of SAR 7,150m still exceeds cumulative dividends declared of SAR 5,150m, so the distribution is affordable over a cycle. It was not affordable in 2025.
Can it survive a downturn
Yes, comfortably. Operating profit covered net finance cost 6.6 times in 2025, or 4.5 times against the SAR 681m actually paid. If operating profit fell 30%, cover on cash finance cost would still be 3.1 times. Add SAR 7.5bn of undrawn facilities and there is no plausible solvency question, and no covenant breach is reported.
No dilution, and that matters
Share capital has been SAR 10,000m in 1,000m shares since the 2017 bonus issue, so every riyal of earnings growth reached shareholders per share: earnings per share rose from SAR 1.59 to SAR 2.48, in line with total profit. Employee awards are small, about 4.1m shares or 0.41% of the register, settled from treasury stock rather than new issuance, at a charge of SAR 40.0m.
Management, governance and capital allocation
| Stated target | When set | Outcome |
|---|---|---|
| Double poultry capacity for SAR 6.6bn, running through 2026 | 2021 to 2022 cycle | Processing moving from about 250m birds toward 450m. Still running, and enlarged since |
| Optimal leverage of about 2.5 times net debt to EBITDA | Stated financial policy | Met. 2.48 times at 31 December 2025, inside the board's limits |
| Capital spending to normalise toward 7 to 8% of revenue | Restated in the 2025 CFO review | Not yet. Ran at 19.9% in 2025, guided to stay elevated through delivery |
| Dividend payout of 40 to 60% of earnings, 2026 to 2030 | Set in the 2025 report | Forward target. The 2025 payout of 46% sits inside it |
Source: Integrated Annual Report 2025, CFO review and dividend policy. Tier 1.
Over five years Almarai put roughly SAR 13.4bn into property, plant and equipment, SAR 4.5bn into livestock, SAR 1.02bn into Pure Beverages and about SAR 5.2bn into dividends. Allocation went into the operating business rather than unrelated ventures, but the return has not cleared the cost of capital: return on invested capital rose from 7.4% to 10.0% and fell back to 8.9%. There has been no material buyback.
| Holder | Start of 2025 | End of 2025 | Note |
|---|---|---|---|
| Sultan Holding Group | 23.70% | 23.70% | Founding family vehicle |
| SALIC | 16.32% | 16.32% | State agricultural investment company |
| Abdulqader Al Muhaidib and Sons | 2.87% | 5.19% | Crossed the 5% disclosure threshold during the year |
| Everyone else | 57.11% | 54.79% | 115,392 holders in total |
Source: Integrated Annual Report 2025, ownership notifications under Article 85 of the Capital Market Authority rules. Tier 1. Institutions hold 86.9% of the register and Saudi nationals 86.4%.
Savola Group distributed its entire 34.52% holding, 345.2m shares, to its own shareholders as an in-kind dividend approved in December 2024. A single strategic block became thousands of small holdings. The float is far larger and the shares more liquid, which is good. And a large volume of stock landed with holders who had not chosen to own Almarai, which is the most plausible explanation for a 24.4% price fall during 2025 in a year when profit rose 6%.
Control rests with two blocks totalling 40.0%: the founding family through Sultan Holding Group and the state through SALIC. There is one share class and one vote per share, so a minority holder is not structurally disadvantaged. But direction is set by two long-term holders whose objectives include national food security, not only per-share returns.
Fawaz Bin Mohammed Aljasser became chief executive in January 2026, promoted from executive vice president of the bakery division after nearly two decades in the group. Danko Maras remains chief financial officer. Succession was internal and telegraphed, a mark in management's favour, but the incumbent is new and the programme he inherits is the largest in the company's history. The accounts are audited by KPMG Professional Services with an unqualified opinion and no emphasis of matter, and zakat assessments are settled with the authority through 2023.
Valuation
Model chosen: a free cash flow to the firm discounted cash flow. Almarai's value turns on how much capital it must spend to grow, which a cash flow model asks and a multiple does not.
| Measure | End 2022 | End 2024 | End 2025 | Today | Read |
|---|---|---|---|---|---|
| Share price, SAR | 55.80 | 57.20 | 43.26 | 47.80 | Up 10.5% since year end |
| Price to earnings | 31.2x | 24.4x | 17.4x | 19.5x | De-rated hard, now re-rating up |
| Price to book | 3.29x | 3.04x | 2.11x | 2.33x | The same pattern |
| Dividend yield | 1.79% | 1.75% | 2.66% | 2.41% | Better than it was, still thin |
Year-end prices from the Integrated Annual Report 2025 (Tier 1). Today's column uses earnings of SAR 2.45 a share for the twelve months to 30 June 2026 and book value of SAR 20.53.
All six rows from one source on one date: StockAnalysis, 9 August 2026, revenue trailing twelve months. Tier 4. Peer median excluding Almarai is 1.12x, so Almarai carries an 87% premium. The Saudi market traded on 17.7 times earnings on 4 May 2026.
Two rows contradict the case. SADAFCO is higher on sales at 2.21 times, but it is a fifth of the size with no SAR 18bn programme, so a similar multiple on far lower capital intensity is the better one. Savola at 0.30 and Tanmiah at 0.41 are the sharper contrast: an 87% premium to the peer median, deserved on brand, not returns. Price to sales also ignores debt, which Almarai has and SADAFCO does not.
The assumption block, every input
| Input | 2026E | 2027E | 2028E | 2029E | 2030E | Why |
|---|---|---|---|---|---|---|
| Revenue growth | 8.0% | 7.0% | 6.5% | 6.0% | 5.5% | H1 2026 ran at 9%, fading toward Gulf population growth |
| Operating margin | 13.2% | 13.5% | 14.0% | 14.3% | 14.5% | Dips on water dilution and poultry ramp-up, then passes the 2024 peak |
| Depreciation and amortisation | 11.5% | 12.0% | 12.5% | 12.8% | 13.0% | Rises as new plant commissions. Was 11.3% in 2025 |
| Capital investment | 21.0% | 18.0% | 15.5% | 13.5% | 13.0% | Falls from 22.9% in 2025, stays above the guided 7 to 8% |
| Working capital | 18.5% | 18.5% | 18.5% | 18.5% | 18.5% | Held at the 2025 level of 18.7% of revenue |
| Zakat and income tax charge | 4.8% | 5.4% | 6.0% | 6.5% | 7.0% | Of operating profit. The zakat base is built from equity and liabilities, so it rises as plant commissions |
Author's estimates. Capital investment is plant, intangibles and livestock net of disposal proceeds: 22.9% of revenue in 2025, against the 19.9% the company quotes for plant alone. The zakat and income tax charge was 4.5% of operating profit in 2025, held down by capital work in progress, which is deducted from the zakat base.
| Component | Value |
|---|---|
| Risk-free rate | 4.47% |
| Equity risk premium | 4.23% |
| Country risk premium | 0.85% |
| Beta | 0.89 |
| Cost of equity | 9.1% |
| Cost of debt | 5.7% |
| Debt share of enterprise value | 20.8% |
| Weighted cost of capital | 8.4% |
| Terminal growth | 2.5% |
The risk-free rate is the US 10-year Treasury yield on 9 August 2026 (Investing.com, Tier 4); a dollar rate is the right anchor because the riyal is pegged. The equity risk premium is Damodaran's implied US figure of January 2026 (Tier 3). The country risk premium is derived from Almarai's own five-year dollar sukuk of September 2025, priced at Treasuries plus 85 basis points, which is a corporate spread and therefore conservative. The cost of debt is carried before tax because zakat is not levied on profit, so borrowing buys no interest shield.
| Line | SAR million |
|---|---|
| Present value of 2026E to 2030E free cash flow | 8,821 |
| Present value of terminal value | 43,995 |
| Enterprise value | 52,816 |
| Less net debt at 31 December 2025 | (11,966) |
| Less lease liabilities | (550) |
| Equity value | 40,300 |
| Shares outstanding, million | 1,000 |
| Value per share, SAR | 40.30 |
Discounted at 8.4% on a mid-year basis, the terminal value at the end of year five. Minorities are not deducted: they took SAR 0.6m of 2025 profit. The terminal value is 83% of enterprise value, which is high, and follows directly from capital spending suppressing near-term cash flow.
A second method, deliberately different
| Return on equity | Payout | Implied price to book | Value per share, SAR |
|---|---|---|---|
| 12.5% | 50% | 2.20x | 45.26 |
| 11.5% | 50% | 1.72x | 35.39 |
| 12.5% | 60% | 1.84x | 37.69 |
Book value SAR 20.53 a share. Return on equity of 12.5% is the company's own figure on average equity. The 40 to 60% payout is board policy for 2026 to 2030. Cost of equity 9.1%.
The equity-side method gives SAR 35 to SAR 45, straddling the cash flow answer of SAR 40.30. Hold return on equity at 12.5% and the shares are worth about SAR 45. Let it slip one point to 11.5% and they are worth SAR 35. Return on invested capital has already slipped, from 10.0% to 8.9%. Whether return on equity follows it down is the single question a buyer is answering.
Analyst coverage
Four named houses with attributable actions to 14 July 2026: United Securities, Buy, 14 July 2026. FAB Securities, Buy, 9 July 2026. Riyad Capital, Neutral, 6 July 2026, affirmed after the Q2 result. SADIF, Sell, 21 May 2026. That is two Buy, one Neutral, one Sell, and it is a sample of the coverage rather than a census. The published stance is majority positive and this range sits below the current price. The gap has one cause: how fast capital spending falls. The positive case assumes the programme finishes and spending drops toward the guided 7 to 8%, lifting free cash flow sharply from 2027. This note carries 13% at the end of the forecast because Almarai has guided to normalisation before and enlarged the programme instead.
| Candidate value, SAR | Status |
|---|---|
| 40.30 — discounted cash flow, base case | The anchor. The only value derived from the company's own cash generation rather than a scenario weighting |
| 43.90 — midpoint of bear and bull | Labelled, not used. Pulled up by a bull case with a wide spread |
| 41.41 — probability-weighted expected value | Labelled, not used. Close to the anchor, which is reassuring |
Fair value range SAR 36 to SAR 46: the low end is the base case discounted at 8.9%, the high end the same case at 7.9%, terminal growth held at 2.5% for both. Margin of safety 20%, giving a preferred purchase price of SAR 32.20. Every derived figure in this note computes off the anchor, not off the midpoint of the range.
Catalysts, scenarios and sensitivity
| Event | When | Way | What it is worth |
|---|---|---|---|
| Q3 2026 results | Early October 2026 | Either | First test of the claim that H2 margins improve. Each point of margin is about SAR 240m of profit, roughly SAR 4.30 a share |
| Higher diesel and energy prices | Announced 5 January 2026 | Negative | About SAR 70m of added cost in 2026, roughly 2% of operating profit. Utilities in cost of sales rose 26% in 2025 |
| New poultry and seafood capacity commissions | From 2026, in stages | Positive if it fills | What the SAR 7bn poultry programme buys. Capital work in progress of SAR 5.8bn earns nothing today |
| Al Watania Poultry sale process | Bids through 2025, no outcome | Negative if Almarai wins at that price | Around SAR 2bn. Debt-funded it takes net debt to EBITDA to about 3.0 times, above the board's 2.5 times policy |
| 2026 dividend declaration | Usually mid-December | Either | First application of the 40 to 60% payout policy, against 46% on 2025 earnings |
| FY2026 results | Late January 2027 | Either | Shows whether capital spending is genuinely falling toward the guided 7 to 8% |
Company announcements and the Integrated Annual Report 2025. Value effects are the author's calculations off the base model.
Vertical marker = current price SAR 47.8
Bear: incremental capital keeps earning below the base, the company compounds book value at roughly its cost of capital and the shares are worth little more than book. Base: the discounted cash flow anchor. Bull: the programme commissions on time, spending falls to the guided 7 to 8% and margin reaches 15.5%. Probabilities are the author's. Returns are to the value shown from the 9 August 2026 price, before dividends.
The bear case, argued properly
- The spending never earns its keep. Capital investment went from 7% of revenue to 20% while return on invested capital went from 10.0% to 8.9%. The simplest reading is that incremental capital earns less than the existing base.
- Poultry is a commodity fight. The chief financial officer himself describes excess supply and tighter pricing. Al Watania is larger in fresh chicken, Tanmiah and Entaj are expanding, Balady is adding 200m birds and JBS said it would double Jeddah output.
- The dividend does work the cash flow cannot support. A 2.4% yield is most of what a buyer is paid today, and in 2025 it was borrowed. If leverage constrains it, the return case loses its floor.
The bull case, argued just as hard
- The programme finishes and cash floods back. Capital work in progress of SAR 5.8bn is 13% of gross fixed assets and earns nothing today. If it commissions on time and spending falls to the guided range, free cash flow swings by billions inside two years.
- The brand supports price. Almarai raised prices through the 2022 grain spike and had its gross margin back within three years. Repeat that and margin reaches 15.5%, worth SAR 61.40.
- The float is the biggest it has ever been. Savola's block went to thousands of holders, which most likely drove the 24.4% fall in 2025 while profit rose. Forced selling ends, and the shares can now enter portfolios that could not previously build a position.
Risks and invalidation
| Risk | How it damages the thesis | Effect on value | What to watch |
|---|---|---|---|
| Capital spending does not normalise | Every riyal above maintenance is one shareholders never see. Guided to 7 to 8% of revenue, delivered 20% | Holding spending at 15% rather than 13% costs about SAR 6.60 a share | Capital spending as a share of revenue, each quarter |
| Poultry oversupply persists | Almarai adds 70% more birds into a segment where it is already second and rivals expand on subsidised credit | A margin stalling at 13.3% rather than 14.5% costs about SAR 4.80 a share | Poultry revenue growth against volume growth, and any discounting language in the results |
| Feed grain and energy costs | Material is 61% of cost of sales and the fleet runs on diesel. Only some is hedged | One point of margin is about SAR 220m of profit, about SAR 4.30 a share | Corn and soya prices, and announced tariff changes |
| Dividend outgrows cash | 2025 distributions exceeded free cash flow and were funded by borrowing | A cut would remove the 2.4% yield holding up the return | Free cash flow against dividends paid, every half year |
| Acquiring Al Watania at the reported price | About SAR 2bn of debt-funded consolidation into an oversupplied segment | Leverage to about 3.0 times, plus goodwill on a large asset base | Any Tadawul announcement on the process |
| Egypt and Jordan impairment | Tested at a 14.5% discount rate; a 17% cut to the growth assumption exhausts the carrying value | Up to SAR 105m of goodwill, SAR 0.1 a share. Small in cash, large as a signal | The Egyptian pound, and the impairment note in the next annual report |
| Concentrated control | Two holders own 40.0%, one a state investor whose objectives include food security | Shows up as capital spending that is strategically right and financially thin | Capital projects announced without a stated return |
Cost structure and impairment sensitivities from the Integrated Annual Report 2025 (Tier 1). Value effects are the author's calculations off the base model.
What would prove this note wrong
- Capital investment falls below 12% of revenue on a trailing basis with operating margin at or above 14.0%. That combination alone lifts the base case above today's price.
- Return on invested capital recovers above 10.0% for two consecutive years.
- Free cash flow covers the dividend at least 1.5 times in a full year during the programme.
- Poultry revenue grows above 10% while group margin holds, meaning the new birds sell without discounting.
Portfolio fit, entry strategy and the decision
Liquidity is not the constraint. SAR 43.0m of stock trades on an average day, about USD 11.5m, so a position of a few hundred thousand dollars can be built or sold inside a session, and the float improved when Savola's block was distributed. Concentration is not the constraint either. The binding constraint is the drawdown: the bear case implies a 45% fall, and the shares already fell 24.4% in one calendar year while profits rose. A holder must sit through a fall to roughly SAR 26. That caps the band at 2%, and at today's price the right weight is zero.
Almarai is a defensive Saudi consumer holding: pegged currency, non-cyclical demand, beta of 0.89 and a dividend. Its role is ballast, not growth, and it duplicates exposure a holder already has through any broad Saudi fund, so it earns a smaller weight than its merits suggest.
The preferred purchase price is SAR 32.20 and the shares sit 48% above it. Closing that gap needs a de-rating or poor sentiment, and the stock traded at SAR 38.18 within the last year. Because the range is wide and the bear case is real, build in thirds: a third at SAR 33, a third at SAR 30, a third at SAR 27. Do not average up.
| Test | Verdict | Evidence |
|---|---|---|
| The business is understandable | Pass | Food, sold weekly, in one region |
| A moat is identified with a mechanism | Pass | Narrow: owned cold chain and route density |
| The balance sheet survives a downturn | Pass | Cover 3.1x at 30% lower profit |
| Management can be trusted with the business | Pass | Long tenure, internal succession, clean audit |
| Management has met its capital spending guidance | Fail | 20% of revenue against 7 to 8% guided |
| Earnings quality is clean | Pass | One-offs 3.1% of profit, no dilution |
| Incremental capital earns more than it costs | Fail | ROIC 8.9% against a cost of 8.4% |
| Price below fair value less the margin of safety | Fail | Trades 48% above the SAR 32.20 entry |
| Risks are tolerable and quantified | Pass | Bear case is a 45% fall, survivable |
| The position is sizeable and liquid | Pass | USD 11.5m traded daily |
Author's decision framework. Seven pass, three fail, and the three that fail decide it.
The quality tests are met, so this is not an AVOID. The price and return-on-capital tests are not, so it is not a BUY. The rating is WATCH, triggered at or below SAR 32.20, or by two quarters with capital spending under 12% of revenue and operating margin above 14.0%.
What to monitor
- Every quarter: capital investment as a share of revenue, and free cash flow against dividends. These two carry the thesis.
- Every quarter: operating margin, and whether poultry grows on volume or on price.
- Every year: return on invested capital against the 8.4% cost of capital, and the Egypt and Jordan impairment note.
- As announced: any move on Al Watania, any change to the 2.5 times leverage policy, and the December dividend against the 40 to 60% target.
Appendix: basis of analysis
Built from the Almarai Integrated Annual Report 2025, audited by KPMG Professional Services for the year to 31 December 2025, with the Q2 2026 earnings release of 5 July 2026 and the H1 2026 results of 7 July 2026. Market data is as at 9 August 2026 unless a different date is stated on the item. No currency conversion affects the valuation: the company reports in riyals and the model is built in riyals, and dollar figures use the pegged rate of SAR 3.75. Where two sources disagreed on the current share price, the exchange-sourced figure was used.
| Source | Tier | As of | Used for |
|---|---|---|---|
| Almarai Integrated Annual Report 2025, including audited statements and notes | 1 | FY to 31 Dec 2025 | Five-year financials, segments, debt, ownership, dividends, capital plans, impairment, acquisition |
| Almarai Q2 2026 earnings release, with the Saudi Press Agency report of it | 1 and 2 | 5 July 2026 | H1 and Q2 2026 revenue and profit |
| Argaam company page and analyst recommendations | 3 | 9 Aug 2026 | Share price, traded value, beta, quarterly profits, analyst ratings, diesel cost |
| Argaam and Bloomberg on the Savola distribution and the Al Watania sale process | 3 | Dec 2024, Nov 2025 | Ownership change and the pending transaction |
| Saudi Poultry Magazine, reporting a Sukuk Capital study and the Entaj IPO prospectus with Euromonitor data | 3 | Feb, May 2025 | Poultry market size, self-sufficiency and brand share |
| Mordor Intelligence and Market Research Future sector reports | 4 | Nov 2025, May 2026 | Competitor expansion plans and the Vision 2030 self-sufficiency target |
| StockAnalysis listing of Saudi Exchange stocks | 4 | 9 Aug 2026 | Peer market capitalisation and revenue, 52-week range, earnings date |
| Saudi Exchange market price to earnings ratio via CEIC | 4 | 4 May 2026 | The market multiple used in the valuation comparison |
| Investing.com bond board | 4 | 9 Aug 2026 | US 10-year Treasury yield used as the risk-free rate |
| Aswath Damodaran, implied equity risk premium | 3 | Jan 2026 | The equity risk premium in the cost of capital |
Limits of desk research
Three things would sharpen this note and none is public. Segment operating profit: Almarai discloses revenue by business line but not profit, so the judgement that dairy carries poultry rests on inference rather than disclosure. The economics of the poultry programme project by project, which would settle whether the SAR 7bn earns its cost of capital. And the terms of the Al Watania process, which is live and unpriced. Every figure here is drawn from filings and dated public sources, and the model is the author's own.
Almarai Company (2280) equity research note, 9 August 2026. Rating WATCH, fair value SAR 36 to SAR 46 anchored at SAR 40.30, preferred entry SAR 32.20 against a price of SAR 47.80.
This document is independent research prepared for informational purposes. It is not investment advice, not a recommendation to buy or sell any security, and does not constitute an offer or solicitation. Figures are drawn from public sources believed reliable as of the date shown and may change without notice. Anyone acting on this material does so at their own risk and should seek their own professional advice.