Almarai Company "Growth delivered, operating leverage pending" (Neutral)

Research evidence excerpt

Almarai Company "Growth delivered, operating leverage pending" (Neutral)

Investment summary

We reiterate our Neutral rating on Almarai. We positively highlight that Almarai

delivered an impressive growth acceleration in 2Q26. That said, the growth acceleration

did not translate into earnings growth: revenue increased by 11%, while operating

profit was flat and net income declined by 2%. We think the quarter provides clear

evidence that accelerated growth is placing pressure on margins, working capital and

FCF. We believe investors need to see the dairy price hike, poultry ramp-up and recently

launched products helping earnings before taking a more positive view on Almarai

shares. Below we summarise the key positives and concerns around the Almarai

investment case, which we see in our recent conversations with investors.

Top three reasons to own Almarai shares:

1. Revenue growth has accelerated and is increasingly diversified. The strongest

feature of 2Q26 was broad-based growth: revenue increased11% y/y, accelerating from

+7% y/y in 1Q26 with growth across every major channel and nearly all geographies.

KSA contributed SAR290mn of incremental revenue, followed by Egypt (+SAR113mn)

and Kuwait (+SAR39mn), while Egypt grew by 36% in local currency (all in y/y terms).

Traditional trade grew 10% y/y, modern trade 7%, food service 13% and export/other

channels 47%, suggesting that the growth was not dependant on a single customer

group. In addition, we note that Almarai's portfolio is becoming less dependant on

mature dairy categories given that protein revenue increased by 16%, bakery grew 8%

and the recently acquired water business added SAR110mn to revenue.

2. Pricing and mix provide a credible margin recovery catalyst. Almarai increased