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Jamjoom Pharma
Pharmaceuticals: Healthcare
JAMJOOMP AB: Saudi Arabia
26 Jan 2024

US$2.221bn 43.65% US$69.75mn

Market Cap Free Float Avg. Daily Volume

Target price 94.26 1.71

Existing rating
Jamjoom Pharma
Underweight Neutral Overweight

Performance (Rebased to 100) Jamjoom Pharma is in a good position to gain from the expanding healthcare
industry in the Kingdom of Saudi Arabia and other MEA nations. With a broad
240
portfolio of 118 brands spanning 8 therapeutic segments and leadership
190
positions in ophthalmology (#1 player) and dermatology (#2 player), it presently
140 operates in about 36 countries. Its margin profile is the best in its class and
90 superior to that of the more experienced generic players found worldwide. Over
40 the next five years, the stock has potential for 24% FCF growth and 15%
19- Jun-23
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1- Jul-23
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3- Jul-23
4- Jul-23

bottom-line growth. With no debt, the business has plenty of space to expand
through acquisitions, raise its payout ratio, and raise ROE levels. The strong
margins and return ratios indicate
Jamjoom TASI the quality of the management as well as the moats of the business. The
company’s high capex (2019-2022) phase is behind us, thus going forward it will
Earnings witness a period of high cash flow generation. These parameters meet all the
(SAR mn) 2022 2023E 2024E criteria of a company that has attributes of both quality and growth, which we
Revenue 917 1,074 1,235 have noticed only in a few other stocks in the KSA.
YoY % 24.6% 17.1% 15.0%
Leadership position in niche TAs: JP concentrates on specialized treatment
Gross Profit 594 695 800
GM Margin % 64.8% 64.8% 64.8% fields like Consumer Health, Derma, and Optha. In the KSA, it has a high
YoY % 25.1% 17.1% 15.0% ranking in the fields of consumer health, dermatology, and ophthalmology.
EBITDA 260 292 336 These regions account for more than 50% of its sales, and it has a top-three
EBITDA Margin 28.3% 27.2% 27.2% market share there. With the aid of technology and a capable sales force, JP
Net Income 171 246 284 has increased its market share significantly. Notably, it now holds the top spot in
Net Income Margin % 18.7% 22.9% 23.0% the GIT segment and leads the categories for vitamin D3, Optha and Derma in
YoY % 0.4% 43.7% 15.4% Iraq, and Vitamin D3.
ROE 14% 20% 21%
Strong R&D team and healthy product pipeline: JP invests significantly more
DPS 2.13 2.11 2.43
in R&D than its competitors do; over the past three years, it has averaged 4.3%
Source: Company data, Al Rajhi Capital.
of sales in this area. The company boasts one of the biggest R&D teams in the
area, capable of handling everything from bio equivalency studies to patent
filing and literature reviews. It has a 94% success rate in studies pertaining to
bio equivalency. Its robust pipeline of products reflects this. Seventy-two
products were pending approval at different stages as of June 2022. Sixty-four
percent of this pipeline has been de-risked.
New capacities are state-of-the-art facilities: JP will increase its capacity by
nearly 70% with the opening of its two new facilities in Jeddah (25 million units
per year) and Egypt (52 million units per year). Commercial batches of a few
products are now being produced by JP at its manufacturing facility in Egypt,
and exhibit/test batches are being produced at its Jeddah Sterile facility. It is
anticipated that commercial production will start in H2 2023. JP is unique among
its peers because of its advanced technological manufacturing capabilities. It is
a leader in the Kingdom of Saudi Arabia in several areas, such as unit dosage
ophthalmic product production.
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Company Overview
Jamjoom Pharma, originating as a branch of Abdullatif Mohammed Salah Jamjoom and
Brothers Company in Jeddah, KSA, since its inception on September 22, 1994, stands out as
a significant contender in the pharmaceutical sector. With a core emphasis on the
development, production, and global distribution of a diverse range of generic
pharmaceuticals, cosmetics, and consumer healthcare products, the company has cultivated
a robust presence across more than 36 countries, encompassing the GCC, Levant, North
Africa, and other regions. Dedicated to furnishing high-quality products, Jamjoom Pharma’s
expansive product portfolio and extensive distribution network position it as a leading figure in
the industry, ensuring that customers worldwide have access to a broad spectrum of top-
quality pharmaceuticals and healthcare solutions.
Jamjoom
Figure 7 Jamjoom Pharma’s timeline
Pharma
became a
Jamjoom Pharma member
of
“Reyadah”
program
under
comme
rcial Achieved Operation KSA’s
operati breakeven in >15 Visio >SAR 700mn Net
ons countri n sales with market
establi es 2030 leading EBITDA
shed. margin c.29%.

2000 2003 2010 2018 2021

2002 2007 2012 2021 2022

Successful
operations in
First Achieved more Launch of 1st >100 Brands >35 countries
International than SAR Ophthalmic unit registere
operations 200mn in Net dose d in KSA #1 Pharma
Sales manufacturing exporter in
facility in GCC KSA1 and #1 in
Consumer
Health in KSA2

Source: Company data, Al Rajhi Capital Note: 1. According to IQVIA 2019-2021 ranking, calculated as total
export revenue in the main Jamjoom Pharma markets for each company on the aggregate basis over 2019-
2021; 2. #1 player in all therapeutic sub-categories where Jamjoom Pharma operates in KSA, according to YTD
May 2022 IQVIA ranking
 Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix G2: Board of Directors

Appendix G3:
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Investment Thesis
Jamjoom pharma is one of the top pharmaceutical companies in the kingdom of Saudi
Arabia to benefit from the growing healthcare care not just only operating in Saudi
Arabia but also in middle east and North Africa, with a large portfolio of 118 brands
across 8 therapeutic segments.
1. strong leadership position was created by a potent sales team .
2. Outstanding R&D team that reflects the healthy product pipeline.
General Medicine GIT Dermatology 3. art of timing in expansion
Consumer Health Ophthalmology
4. being ready for signing the public tender contracts.
5. discipline and commitment in paying the dividends and capital allocation.
Business Model:
Others In the realm of pharmaceuticals, the company is dedicated to the comprehensive cycle
10%
of development, manufacturing, and strategic marketing of a diverse spectrum of high-
quality branded generic pharmaceutical products. The market outreach extends across
36 countries in the Middle East, Africa, and the Commonwealth of Independent States,
635 with Saudi Arabia, Egypt, Iraq, and the GCC countries serving as primary arenas of
Employees
significant operations and sales.
Core operations:
the company specializes in producing pharmaceutical products encompassing
therapeutic categories such as Ophthalmology, Dermatology, General Medicine,
Figure 11 Commercial team headcount
by country Gastrointestinal (GIT), Cardiovascular (CVS), Central Nervous System (CNS), Over
the Counter (OTC), and Nutraceuticals/Consumer Health. Operating with a broad
product range, stringent quality controls are maintained to garner and sustain the trust
of valued customers (see Appendix G1).
strategic vision:
A pivotal component of the strategic vision revolves around contributing to national and
regional self-sufficiency. This commitment takes tangible form through the optimization
of new product launches, exemplified by the ongoing development of a suite of high-
quality diabetes management products slated for market introduction between 2022G
and 2024 G.
Operational capabilities are fortified by a state-of-the-art manufacturing facility in
Jeddah, accompanied by a new sterile facility in Jeddah scheduled to open in the latter
half of 2023G. Expanding the geographic footprint, a manufacturing facility in Egypt
has been established, also scheduled to commence operations during the second half
of 2023G.
At the heart of innovation lies a robust R&D department, boasting over 91
professionals with the capacity to develop 12 to 15 products annually (see Appendix
B1). These new additions complement existing therapeutic categories, introducing
essential products such as anti-diabetic medications to address crucial needs in the
markets served.
Revenue generation hinges on the strategic sale of pharmaceutical products to
distributors, who play a crucial role in distributing products downstream to hospitals,
pharmacies, doctors, and various healthcare providers.
In categorizing multifaceted operations, a distinction is made between “technical”
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

operations, focusing on product development and manufacturing, and “commercial”

operations, centering on the strategic marketing, sales, and distribution of finished products.
This comprehensive business model encapsulates a commitment to innovation, quality
assurance, and a robust market presence.

Figure 8 JP’s largest TA to drive significant growth Figure 9 Revenue by category – FY21

55 31%
5%
43 14%
39 39 4%
4% 4% 13%
12%
10% 12% 19%
11% 14%
11% 11% 16% 17% 17%
12% 12%
13%

60% 53%
64% 61%

2019 2020 2021 2026

Other Consumer Health
Ophthalmology Dermatology General
Medicine

Source: Company Data, Al Rajhi Capital Source: Company Data, Al Rajhi Capital

Figure 10 Key products market share across respective TA

57%

45%

29%

17%
13%

Hyfresh Elicia-M Ciproxen Zoron Omega 3

Source: Company Data, Al Rajhi Capital

Industry and competitive landscape:

The overall pharmaceutical sector was valued at SAR30.5 billion (or US$8.1 billion) in
2021G, having grown at a CAGR of 6.3% since 2019G (see Appendix B2).
Pharmaceutical product growth over the review period is attributed to positive
macroeconomic drivers such as population expansion, an ageing population, rising levels
of noncommunicable diseases and strong Government funding to expand public
healthcare. Value sales of several pharmaceutical products in the Kingdom benefitted
from rising consumer awareness of maintaining a healthy and responsive immune system
as a result of the COVID-19 outbreak. The Kingdom is heavily reliant on pharmaceutical
imports, with a majority of its products still coming in from the US, Europe, China and
India. One of the core objectives of Vision 2030 is a Government push towards
pharmaceutical security, which aims to increase local production to account for at least
40% of total pharmaceutical product consumption.
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

The key pharmaceutical categories that the company are working on are Ophthalmology,
Dermatology, general medicines, Gastrointestinal Products, Nutraceuticals. in
ophthalmology Jamjoom pharma has a 20.6% market share in this industry and they
ranked 1 in that industry. In dermatology Jamjoom ranked second after Avalon Pharma
Pvt Ltd with 6.7% market share with an impressive growth space (see Appendix B3).
Also in the general medicine industry their market share is 2.1% and they are so far in
that industry which make it hard to compete in it. in Gastrointestinal Products the
company came fourth with 5.5% on market share and they came after AstraZeneca and
other companies that focuses in that industry. Least but not lastly Nutraceuticals industry.
Jamjoom came third with 5% on market share and they came behind bayer ag and
Vitabiotics Ltd . And we can conclude that jamjoom focuses on one main industry which
is ophthalmology and they didn’t drop the other industries but they maintained focusing
on one sector which might affect them in the long run if the industry been crashed.

Figure 12 64% of the pipeline de-risked Figure 13 Product pipeline (mention number of products)

Others; 1
Optha; 12
Anti Diabetes; 17

General
Medicine; 7

CNS; 1
Dermatology; 2

CVD; 12

Consumer
Health; 15
GIT; 5

Source: Company Data, Al Rajhi Capital Source: Company Data, Al Rajhi Capital

Figure 14 R&D Team

Other R&D
8%

PhD
12%

91
Employees

Masters Degree
80%

Source: Company Data, Al Rajhi Capital

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Political exposure:
The company has a huge political exposure. The company exports their product to countries
that faces a huge political risks. Iraq, north Africa and Algeria is the main exposure they
have. And slightly lower exposure in Egypt and turkey. 9.2% of the total company sales in
2022 were in Iraq. That portion of sales is in huge exposure and might vanish in any time. On
the other hand Iraq is expected to grow the fastest at a CAGR of 5.9% to reach SAR9.2
billion (or US$2.5 billion) driven by the Government’s push to increase investments and
accessibility. And that gives a huge potential to grow their net income. North Africa also have
these political issues but they have a huge gap in the industry so it worth the risks that they
are taking.

Economic exposure:

The main economic issue in the countries that they sell in is the inflation. Inflation can affect
that currency and also can affect the currency exchange to SAR. Turkey inflation rate in 2022
was 72.3% and the currency dropped almost 30% to USD and that makes it hard to move the
money with that amount of loss. Egypt also had the same currency issue when they depleted
their reserves instead of counting on the USD. And the money supply last two years were
very high that also affected the currency and makes it difficult to move the money to other
currencies.

Environmental, Social, Governance

The Company plans to continue to build on introducing operational efficiencies to meet the
CMA regulations and the golbal standers to the environment, implementation of efficient
governance management solutions, and improvement in local content scores. The Company
expects that these actions will help to enhance collaboration and cohesive working by the
manufacturing and commercial teams as well as refine the production and reallocation of
resources. As a result, the Company will be able to increase both, volumes and margins, for
key products through improved cost efficiency and economies of scale. In addition, the
Company plans to expand its manufacturing footprint viathe Egypt facility to serve the North
African markets which supports its strategy of selectively expanding market presence.
Environmental
JP Committed with the standers of Environment, Health, Social, through all their operations
and they responsible to deal with emissions, effluent and solid waste at the source to ensure
that there is minimum impact on environment.
Social
The company committed in the responsible and ethical management of EHS Elements in all
its activities to safe the employees and visitors and contractors. And they committed to the
global standers of ISO 14001 and ISO 45001 certified, To avoid any injury, ill-health. The
EHS function implements an hard training plan to ensure that staff have the required skills
based on their training needs assessment, to carry out routine inspections and audits to
ensure EHS compliance. Employment, the Company and its subsidiaries had 1,255
employees out of which, 401 are Saudi nationals. The Saudization rate of the Company is
45.7%,
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Figure 15: Environmental, Social and Governance exposure of Jamjoom

Governance
The company committed to the standers that is requirements by the CMA, Governance Regulations
issued by the Capital Market Authority, to manage the relationship between the Board of Directors,
executive directors, And shareholders.

Figure 16 Current and Upcoming Facilities (units in million)

200
180 25
160
140 52
113
120
100
80
60 113
40
20
0
Current Current + Upcoming
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Jeddah Main Facility Egypt Main Facility Jeddah Sterile facility

Source: Company data, Al Rajhi Capital

Board of directors
The Board of Directors shall be responsible for managing the Company and doing everything
to uphold the Company’s interests, and develop and maximize its value. the Board be vested
with the broadest powers to manage the Company and in order to achieve its objectives
inside and outside of the Kingdom. The Board of Directors has overall responsibility for
establishment and oversight of the Group’s risk management framework. The executive
management team is responsible for developing and monitoring the Group’s risk
management policies. The team regularly meets and any changes and compliance issues
are reported to the Board of Directors (See Appendix G2).

Executive management
The Executive Committee shall exercise all the powers vested therein, submit its reports to
the Board, and keep direct channels of communication open therewith.
The Executive Committee consists of three (3) to five (5) members appointed by the Board of
Directors for a period equal to the membership term of the Board.
The Board shall take the necessary measures to enable the Executive Committee to carry
out its functions, including informing the Executive Committee, without any restrictions, of all
data, information (See Appendix G2).

Figure 17 Advanced technological capabilities differentiating it in the MEA region

Blow fill and seal Soft-gel capsule Glatt granulation Automated dermatology fi
technology technology system equip

1st in KSA to produce 1st in KSA to produce VMS 1st in KSA to use full contain
ophthalmicproducts in unit dose productsin soft-gel capsules vertical granulation

Advanced aseptic manufacturing Enhances bioavailability for p

inone continuous system soluble molecules

Reduces human in
risk o

Source: Company data, Al Rajhi Capital

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Figure 18 Top 10 companies in Tender Market (Market share)

10%
9% 9%
9% Tender Market Size:
SAR 21bn 8%
8%
7%
7%
6%
6%
5% 5%
5%
4% 4%
4%
3%
3%

2%
1%
1%

0%
Jamjoom Organon Roche GSK Novartis Novo Pfizer Tabuk SPIMACO Sanofi Hikma
Nordisk
Source: IQVIA MAT June 2022, Al Rajhi Capital
Figure 1 Capex as % sales
Figure 20 Dividends to remain stable

18.4%
87%
16.7%

66%
60% 60%
55%
9.6% 9.4%
44%

4.8% 4.7%

2019 2020 2021 2022

2023E 2024E 2019
2020 2021 2022
2023E 2024E

Source: Company Data, Al Rajhi Capital

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Swot analysis
Strengths Weaknesses
1. Human intervention is limited in
modern factories
2. Decline in the Egyptian currency 1. Their reliance on
3. Strength in research, development tenders in KSA
and health production line
4. Large financial profile with a
sustained growth rate
5. Strong position in Saudi Arabian
domestic market
6. No debt
7. 118 brand
8. therapeutic sectors

Opportunities Threats
1. Business development strategy 1. Changes in
2. Present in 36 countries exchange rate
3. High level in targeting key markets 2. Spimaco a very
to accelerate and prioritize growth strong competitor

Porter’s five model

Threat of new entrants
It need a large capital in terms of the cost of production, high technologies used in industry,
and government approvals that are difficult to obtain .
Power of supp
The company has factories, so it does not have many suppliers, except for some raw
materials so they rely on long term contracts with suppliers.

Power of buyers
The number of buyers is very high because it is a drug company located in 36 countries, so it
is not possible to negotiate prices and payment dates .

Competitive rivalry
Jamjoom faces fierce competition in the inner range of (Spimaco and Tabuk).
Spimaco is the largest pharmaceutical manufacturing company, with a production capacity of
approximately 2.4 billion units annually and a 14% market share in the general medicine
category. Its market share for government tenders is 9%, while Jamjoom has a market share
of 1%. However, Spimaco's lower profit margins are attributed to its lower investments in
research and development expenses. In the last 5 years, it allocated only 2% of its revenues
to research and development, while Jamjoom allocates 5%. Including in its portfolio there are
strong brands such as Vivadol and sapofen .
Tabuk is the second largest pharmaceutical factory in the Kingdom, with a production
capacity equal to 2 billion units annually. Its market share in government tenders is
approximately 8%. Tabuk focuses on manufacturing generic formulas for patented brands
such as Nexium.
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Financials in Charts

Figure 1 Revenue mix over the years by TA Figure 2 Active Portfolio

100% 1% 2% 4%
8% 7% 6% Consumer
90% 6% Ophthalmology
7% 7% 7% Health
12% 22%
80% 10% 12% 9%
9% 26%
70% 7% 9% 10%
10%
60% 18% 16%
20%
50% 18%
40% 18% 19%
18% 16%
30%
20% Dermatology
32% 27% 31% 26%
10% OTC 12%
0% 8%
2019 2020 2021 2022
GIT
CNS 4%
Ophthalmic Dermal General Medicine Consumer Health General
7% Cardiovascular
Medicine
GIT OTC CVD CNS 8%
13%
Source: Company Data, Al Rajhi Capital Source: Company Data, Al Rajhi Capital

Figure 3 Supplier Concentration Figure 4 Margin profile over the years

63.7% 64.5% 64.8%

70.0%
57.7%
60.0%
11%
50.0%
33.8%
Top 10

8% 40.0%
29.8% 29.1% 28.3%
5% 30.0% 29.8%
23.9% 25.1% 25.5%
4% 20.0%
25.7% 23.2%
21.4%
Others, 58% 4% 10.0% 18.7%

3% 0.0%
3% 2019 2020 2021 2022
2%
EBITDA Margin Gross Margin
1%
2% Operating Margin Net Margin

Source: Company Data, Al Rajhi Capital Source: Company Data, Al Rajhi Capital

Figure 5 R&D and Capex as % of Sales Figure 6 Revenue mix by geography over the years

1000.0 20.0% 100%

11% 8% 9% 7%
900.0 18.4% 18.0% 90% 6% 9% 10%
16.7% 916.7 9% 7%
800.0 16.0% 80% 9% 7%
7%
700.0 805.3 14.0% 70% 12% 12%
10%
731.7 735.7 16%
600.0 701.3 12.0% 60%
500.0 50%
9.6% 9.4% 10.0%
400.0 8.0% 40%
30% 67% 63% 64%
300.0 6.7% 6.0% 57%
5.0%
20%
200.0 3.6% 4.0%
3.4% 10%
100.0 3.3% 4.5% 2.0%
0.0 0.0% 0%
2018 2019 2020 2021 2022 2019 2020 2021 2022

KSA Gulf Egypt Iraq North Africa and other export markets
Sales R&D as % of sales Capex as % of sales
 Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Source: Company presentation Source: Company presentation

Assumptions and Valuations

Since 2022, JP did 7% of it’s total sales in Egypt due to there net currency exposure that
happens there, while Egypt faced a hundred percent depreciation in there Egyptian pound.
However, they took a loan of 57 m USD to build their facility, and invest it in egypt around this
number, after that the currency risk will depend on the sales that will come from the local
market, egypt, and other subsidiaries, once the facility starts selling the product.
Furthermore, it results from the accounting team because they converted the loan into
subordinated perpetual instrument in the fourth quarter of 2022(see Appendix D1).
Jamjoom faces fierce competition in the inner range of (Spimaco and Tabuk).
Spimaco is the largest pharmaceutical manufacturing company, with a production capacity of
approximately 2.4 billion units annually and a 14% market share in the general medicine
category. Its market share for government tenders is 9%, while Jamjoom has a market share
of 1%. However, Spimaco's lower profit margins are attributed to its lower investments in
research and development expenses. In the last 5 years, it allocated only 2% of its revenues
to research and development, while Jamjoom allocates 5%. Including in its portfolio there are
strong brands such as Vivadol and Sapofen (see Appendix D2).
Tabuk is the second largest pharmaceutical factory in the Kingdom, with a production
capacity equal to 2 billion units annually. Its market share in government tenders is
approximately 8%. Tabuk focuses on manufacturing generic formulas for patented brands
such as Nexium. Jamjoom Pharma finds itself strategically positioned within a burgeoning
market landscape, primarily driven by the nation’s deliberate strategy to bolster its citizenry.
This demographic surge offers a promising backdrop for pharmaceutical companies, with
increased demand for healthcare products and services. Recognizing the pivotal markets
within the region, Jamjoom Pharma has prioritized its efforts to amplify production
capabilities, particularly in Saudi Arabia and Egypt.
These countries, given their expanding populations and evolving healthcare needs, present
lucrative opportunities for the company to solidify its market presence and cater to growing
demands effectively. The first six months of 2023 marked a pivotal period for Jamjoom
Pharma, witnessing a robust growth trajectory in revenue by a notable 24.52%(see Appendix
E1). Such a substantial uptick underscores the company’s strategic initiatives, market
positioning, and the effectiveness of its product offerings in meeting consumer demands.
As the year progresses, the company is poised for further expansion and growth. The
imminent establishment of two cutting-edge manufacturing facilities in the latter half of the
year signifies a significant leap. With an anticipated surge in production capacity by nearly
67%, Jamjoom Pharma is gearing up to capitalize on this enhanced capability. This
expansion not only positions the company to cater to escalating market demands but also
aims to optimize resource utilization, driving revenues and fostering sustained growth.

Appendix G1: Business

Model
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix A: Capacity and utilization:

Appendix B1: Income statement:

Appendix B2: Market share and Revenue portions: (top down)

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix B3: Balance sheet:

Appendix C1: Intangible assets and PP&E:

 Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix C2: Working capital

Appendix C3: Retained earnings and OCI:

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix D1: Perpetuity and exit EBITDA multiple approaches:

Appendix D2: Cost of capital (WACC):

Appendix E1: Beta:

 Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Appendix F1: Free cash flow buildup:

Appendix F2: Fair Value per Share:

Appendix F3: Perpetuity and exit EBITDA

Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Analysis:
Anticipated to commence production in the latter half of 2023, Jamjoom is expanding its
production capabilities. The company, with an efficient primary facility in Jeddah operating at 85%
utilization (as of June 2022), is constructing two additional facilities. One, situated in Egypt, boasts
an annual production capacity of 52 million, while the other, a sterile facility in Jeddah, has an
annual production capacity of 25 million (see Appendix A1). This expansion is set to elevate the
total annual production capacity to 190 million by the end of this year. Additionally, with the
introduction of these new factories, we are increasing our growth expectations, positioning
ourselves to meet rising demand and efficiently export products to North African markets.
As of COGS JP sees that they won’t need more human force in their two new facilities. So
because of that we expect COGS to remain with the same growth rate and we don’t expect
surprising figures in there. And by stabling COGS growth rate that will directly affect the net
income. As a prominent pharmaceutical manufacturer in Saudi Arabia, the Company holds a
noteworthy position in the market. In the ophthalmic segment (see Appendix C2), one of the five
key areas, the Company secured a market share of 20.6% in 2021G, as highlighted in a market
study report by the Market Consultant in August 2022G. Jamjoom’s market share growth is
influenced by societal and macroeconomic trends, such as the increasing prevalence of generic
medicines and the Company’s belief in the strong performance of its products due to customer
preferences. The Company’s market position is further strengthened by government-led initiatives
and investments in the local healthcare and manufacturing sectors, aligning with the Vision 2030
objectives. The demand is expected to increase due to the government’s inclination to boost the
population, further contributing to the Company’s growth prospects. This national strategy aims to
enhance private sector involvement in the Kingdom of Saudi Arabia’s economy. Pharmaceutical
manufacturing holds a central role in the National Industrial Development and Logistics Program,
targeting a 40% domestic production of all pharmaceuticals consumed in the country, up from the
current approximate 30%. This governmental support serves as a significant boost for the
Company as a leading domestic manufacturer, positioning it to gain additional market share in the
coming years.
While our expectation is not for a substantial increase in the company’s market share, there is an
expectation of significant overall growth in the sector’s value. On the other hand JP was building
two factories in the same time and that will burn more cash that ever before. Due to that we
expect that the next 3 years they wont generate a lot of cash, but in the long run they will have
more and more than previous years. Also inventory will rise due to the two new facilities and that
will help delivering products fast and recognizing the revenue faster than before. In term of
payables the company sees that they don’t expect any surprises and they are trying to maintain
these numbers without taking it further much more. But the receivables in 2023 were significantly
higher than previous years and according to the financial statements of Jamjoom, they faced an
increasing in account receivable with approximately 40m SAR, due to the sales growth, seasonal
variations which they had experience fluctuations in sales level during the year, and the finished
goods that have not yet been exported from Egypt to Saudi Arabia, which we can consider it as a
customer delays. in Perpetuity and exit EBITDA multiple approaches we used a 4.5% (see
Appendix B2) risk free rate because of the expectations of deducting the interest rates starting
from Q1 2024. Beta was taken from the largest companies in the world to have more accurate
close beta that we can rely on. And the cost of debt after tax that is because the debt was taken
from Egypt and there average tax rate is 8%. The industry average P/E ratio in 22.52 so we used
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

that multiple in the P/E valuation. After having all of these results and because the DCF model is
more accurate to evaluate JP we gave it the highest weights and the multiples were lower. Our
target price is 94.26 SAR (see Appendix F3) and for now the company is sell.

Key Risks
Risk relating to the company’s supply chain:
To make medicines, a company needs specific ingredients called APIs and other raw
materials. These ingredients must come from approved sources regulated by health
authorities. Among all the materials needed, APIs are the most important.
In the medicine industry, there aren't many suppliers for some of these key ingredients.
Sometimes, a company has to depend on just one or a few suppliers for these essential
ingredients. The company tries to have more than one reliable supplier for most
products, but it's not always possible because there aren't many suppliers available in
the industry.
Risks related to the complexity of manufacturing the Company's products:
The company works hard to make really good medicines for its customers. Making these
medicines is tough because there are strict rules the company has to follow. They use
complicated machines and computer systems to help them make the medicines and talk
to others about getting the right stuff, checking the quality, and sending the medicines
out.
Sometimes, things can go wrong when making these medicines. It could be because the
machines break, rules aren't followed correctly, the materials used aren't good, or other
problems like bad weather. If the problems are serious, the company might have to stop
making some or all of its medicines until they fix the issues.

Risk related to cross border sales of products in foreign countries:

A large number of sales related to medicines occur outside Saudi Arabia, and this is
considered one of the company’s plans and strategies, and the company may expand
further in selling in African countries, which it will expand sales and purchases across
different countries will likely happen. But when a company operates in different countries,
there are risks involved, including, but not limited to:
• Currency exchange rate fluctuations or imposition of foreign exchange controls.
• Increased difficulty in collecting unpaid accounts.
• Differing local product preferences and product requirements.
• Differing tax regimes.
• Risk of loss at sea or other delays in delivering the products caused by
transportation problems.
Any of these points could affect the company’s operating results.

Political and economic risk:

The majority of the Company primarily operates in Saudi Arabia, and its financial
performance depends on the prevailing economic and political conditions in Saudi
Arabia, as well as global economic conditions that impact Saudi Arabia's economy.
Saudi Arabia's economy relies heavily on the oil sector, which contributes significantly to
the GDP. Fluctuations in oil prices could have a negative impact on the economy of
Jamjoom Pharma
Pharmaceuticals: Healthcare
26 Jan 2024

Saudi Arabia. In addition, the country is facing high levels of population growth. Together,
these circumstances pose a significant risk to the Company's business, financial position,
operating results and future prospects.
The Company's performance is also influenced by various economic factors, such as the
availability of consumer credit, interest rates, unemployment rates, wage levels, tax
rates, costs associated with water and electricity consumption, and the potential removal
of government subsidies for certain materials. Changes in these factors can affect
consumer spending and demand for the Company's products. Failure to adapt to market
changes can have a negative and substantial impact on the Company's business,
financial position, operating results, and prospects.
Moreover, many countries in the Middle East, including Saudi Arabia, are currently
experiencing political and security instability. The Company's oprations can be adversely
affected by negative diplomatic relations, economic and political conditions, or other
factors in these countries or other nations. Such factors can also impact the overall
economy, foreign direct investment, and financial markets in Saudi Arabia, further
affecting the Company's business, operating results, financial position, and prospects.
Any unexpected significant changes in the political, economic, or legal environment in
Saudi Arabia, other Middle Eastern countries, or countries from which the Company
sources its products, including market fluctuations, recessions, insolvency, employment
weakness, technological shifts, or other developments, can also have an adverse effect
on the Company.
Additionally, substantial changes in tax or trade policies, tariffs, or trade relations
between Saudi Arabia and other countries, as well as alterations in local policies such as
the imposition of unilateral tariffs on imported products or negative sentiments towards
Saudi Arabia due to increased import tariffs and changes in trade regulations, can result
in increased costs for the Company, limited access to suppliers, and reduced economic
activity.
If any of the aforementioned factors occur, they will significantly and unfavorably impact
the Company's business, operating results, financial condition, and future prospects.

Risk related to VAT:

The Company has fulfilled its obligation to submit all of its VAT declarations since its
registration (starting from January 2018 until the present time of this Prospectus), all
within the legally required timeframes. Additionally, the Company has promptly settled all
outstanding liabilities owed to the Zakat, Tax, and Customs Authority within the legally
established deadlines.
Confirmation from the Zakat, Tax, and Customs Authority has been obtained,
acknowledging the acceptance of all VAT returns submitted from the inception of the
Company up to September 2022. As per the existing Tax/Zakat regulations in KSA, if the
Tax/Zakat returns are submitted within the statutory deadline, the statute of limitations for
any potential penalties is set at five (5) years from the date of filing the declaration.