J.P. Morgan International FTM 8 Jun 26 Equity Strategy; French Telecoms; Prudential Plc; Korea Domestic Consumption; Asian Tech; HSBC & STAN; Cosmetics Sector (Japan); Aozora Bank (8304) and More

Research evidence excerpt

J.P. Morgan International FTM 8 Jun 26 Equity Strategy; French Telecoms; Prudential Plc; Korea Domestic Consumption; Asian Tech; HSBC & STAN; Cosmetics Sector (Japan); Aozora Bank (8304) and More

retail). Against this backdrop, we see the higher likelihood of a sector multiple re-set from

~25-26x towards 18-20x as earnings expectations adjust. Dis-Chem’s latest update was a clear step-down versus expectations

(c. 20% earnings miss) and the numbers already point to material profit pressure (~50bps gross margin compression

and ~110bps at the EBIT line). Management commentary suggests limited willingness to step back, with price investment

guided to exceed R1bn in FY27 (vs. R761m in FY26) and share gains/top-line growth remaining the stated priority. At 24.2x

FY27 JPMe, our analysis indicates that the market is still under-appreciating the duration risk to margins and the near-term

earnings algorithm, particularly as price investment coincides with a cost build that is not yet matched by incremental revenue.

On competitive dynamics, we view Shoprite as the key swing factor. Its pharmacy roll-out (c. 200 stores planned) is

meaningful, but the more disruptive potential lies in embedding pharmacy into Checkers Sixty60, which already leads online

food delivery (~80% share). Dis-Chem’s strategic response appears rational in this context, but we see elevated execution risk

while both pricing and cost intensity rise simultaneously. Clicks is also exposed, in our view. We cut earnings by ~10–15% and

move to ~12–19% below Bloomberg consensus (a delta on a headline basis, although in reality likely closer to buy-side

earnings expectations) for FY27-FY28 to reflect the likely competitive response required to protect like-for-like sales. The stock