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2270

Governance: A

SADAFCO

Saudia Dairy and Foodstuff Co.

221.40 SAR / Share

As of: May 28, 2026

16.3x P/E Ratio Trailing 12 Months

4.5x P/B Ratio Price to Book Value

7.2% Dividend Yield Annual Dividend / Share

7.08B SAR Market Cap Total Valuation

0.66 Beta Systematic Risk Index

14.5% Net Margin Net Profit / Revenue

The Story

SADAFCO is a highly profitable, low-leverage dairy and foodstuff leader in Saudi Arabia that generates exceptional returns on capital while returning substantial cash to shareholders.

Source: Q1 2026 (2026-05-04)

Value Creation +13.3% Excess Return on Capital (Spread between ROIC/ROE and Cost of Capital)

Cash Flow Payback — Estimated years of operating cash flows required to cover Enterprise Value

Performance & Distributions

Dividend Yield Trailing annual dividends paid relative to share price

7.2%

Sustainable Growth Rate Rate at which company can grow internally using reinvested profits

-3.7%

Payout Ratio Percent of net profits distributed as dividends

118.0%

Net Margin Net profit margin generated from total operational revenue

14.5%

ROIC Return on Invested Capital

20.4%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

16.3x

P/B Ratio Market capitalization compared to corporate book value

4.5x

EV / EBITDA Operating multiple reflecting core operational leverage

12.6x

EV / SALES Asset pricing multiple relative to total topline revenue

2.4x

Growth Story

SADAFCO's revenue trajectory demonstrates steady expansion, growing from 2,111,480,000 SAR in FY 2023 to 2,857,652,000 SAR in FY 2024, and peaking at 2,999,400,000 SAR in FY 2025, before settling slightly at a TTM level of 2,979,370,000 SAR. Despite this solid historical top-line expansion, the company's long-term growth capacity is structurally shaped by its capital allocation strategy. With a 5-year average reinvestment rate of -18.07%, SADAFCO is not aggressively retaining earnings to fund physical expansion; instead, it operates as a mature cash generator, yielding a negative sustainable growth rate of -3.69%. This negative reinvestment reflects a highly efficient business model that requires minimal capital to maintain operations, allowing the company to return excess cash to shareholders. Strategically, SADAFCO is streamlining its footprint by voluntarily liquidating its operational subsidiaries in Jordan, Bahrain, and Kuwait to transition to a leaner, third-party distributor model, focusing its direct operational resources on its core Saudi Arabian and Polish markets.

Profitability Dynamics

The core strength of SADAFCO lies in its exceptional value creation, characterized by a 5-year average Return on Invested Capital (ROIC) of 20.41%. When compared against its weighted average cost of capital (WACC) of 7.08%, the company generates a substantial positive economic spread of 13.34%, demonstrating significant wealth creation for its providers of capital. This profitability is supported by robust operating efficiency, with a TTM operating margin of 14.88% and a net profit margin of 14.54%, translating into a TTM net income of 433,304,000 SAR. Although recent interim periods show some pressure on gross margins due to rising raw material costs and geopolitical supply chain disruptions, SADAFCO's high-margin Non-Drinks segment and dominant local market position continue to support strong cash flows. The company's ability to generate high returns with minimal reinvestment needs underpins its capacity to distribute significant dividends, such as the 255.7 million SAR announced in early fiscal 2026, alongside active share buyback programs.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

0.66

Cost of Equity Minimum required rate of return demanded by shareholders

7.2%

WACC Weighted average cost of total debt and equity funding

7.1%

Debt-to-Equity Ratio Proportion of corporate funding financed by debt creditors

2.0%

Risk Factors

SADAFCO exhibits a highly conservative risk profile, insulated by a fortress-like balance sheet and low operational volatility. The company's market risk is exceptionally low, as evidenced by a relevered beta of 0.66, reflecting its defensive consumer-staples nature. With a total debt of 139,126,000 SAR against a massive equity base and strong cash reserves, leverage is minimal, and the cost of debt remains highly favorable at an after-tax rate of 3.37%. The primary operational risks stem from external macroeconomic factors, such as the volatility of global raw material costs and regional geopolitical tensions that could disrupt supply chains and procurement. Additionally, the company faces transition risks as it liquidates its operational subsidiaries in Jordan, Bahrain, and Kuwait to shift to a distributor model. However, with a current working capital of 620,427,000 SAR and a strong parentage under Kuwait Projects Company Holding (KIPCO), SADAFCO possesses ample liquidity and structural support to navigate these operational shifts without compromising its financial stability.

Governance Disclosures

Rating: A

We track 11 key governance and oversight matters for this company in our database.

Significance: 3/10 Entrenchment

Nominee Shareholder Structure in Kuwait Subsidiary

SADAFCO holds a 49% legal equity interest in SADAFCO Kuwait Foodstuff Co. W.L.L. but exercises 100% effective ownership and control by holding a 51% beneficial interest through parties nominated by the Group.

Mitigating Factors: On December 25, 2025, the Board of Directors resolved to voluntarily liquidate this subsidiary to transition to a distributor model.

Significance: 2/10 Tunneling

Related-Party Transactions with Parent Company Associates

SADAFCO engaged in transactions with associates of its parent company, KIPCO. During the three-month period ended March 31, 2026, the company procured consultancy services from PKC Advisory amounting to SAR 302 thousand (March 31, 2025: SAR 235 thousand) and recorded sales of goods to Specialised Food Services amounting to SAR 504 thousand (March 31, 2025: SAR 463 thousand).

Mitigating Factors: Transactions were undertaken in the ordinary course of business at commercially agreed terms and were approved by management.

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In-Depth Analysis