Pricing Catching Up - But Mind the Inventory Cover

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Pricing Catching Up - But Mind the Inventory Cover

IdeaMmore transitory nature to the disruption; and (iii) improving FCF generation from

here, as capex spend moderates. At ~15.5x 2027 P/E, valuation remains undemanding

vs history and relative to the sector, and with our longer-term forecasts +HSD%

ahead of consensus, we see scope for upside from here. Price Target stays at SAR

60. Model update inside. Below, we flag four positives from yesterday's post-market

conference call, and two points worth monitoring in the coming quarters.

Positives:

• (+) Dairy pricing coming through, stronger than we anticipated.

Management flagged that despite the +DD% price increases in Saudi fresh

dairy (announced in late May - more here), demand continued to remain

strong with limited elasticity impact, and the company noting that the price

increase landed better than any prior increase over the past 20 years - a

testament we think to (i) the timing of the announcement - i.e., immediately

pre-Eid, and (ii) announcing after competitors had already increased pricing

vs leading the increase historically. As a result, we see potential upside to

our estimates that we had laid out here - albeit likely offset by higher costs

than we had anticipated - see "to monitor" points below.

• (+) Strong poultry volumes and encouraging pricing dynamics. Almarai

sold 88mn birds in 2Q26, a c.20% increase y/y from 73mn in 2Q25 (and

c.80mn in 1Q26), a result of further capacity increases. The company also

noted a healthier poultry pricing backdrop overall - continuing a trend seen

over 1Q26. At the channel level, pricing improved across the board

sequentially from 4Q25 to 1Q26 and into 2Q26, albeit some channel mix

shifts are implying broadly flat pricing in the quarter (i.e., food service lower

margin).