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2286

Governance: B

FOURTH MILLING

Fourth Milling Co.

4.14 SAR / Share

As of: May 28, 2026

11.1x P/E Ratio Trailing 12 Months

2.9x P/B Ratio Price to Book Value

2.7% Dividend Yield Annual Dividend / Share

2.24B SAR Market Cap Total Valuation

0.84 Beta Systematic Risk Index

30.1% Net Margin Net Profit / Revenue

The Story

Fourth Milling Company is a highly profitable, defensive food security player with stable government-backed input pricing, robust operating margins, and consistent cash generation.

Source: Q1 2026 (2026-05-19)

Value Creation +6.3% 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

2.7%

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

-1.5%

Payout Ratio Percent of net profits distributed as dividends

29.5%

Net Margin Net profit margin generated from total operational revenue

30.1%

ROIC Return on Invested Capital

12.7%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

11.1x

P/B Ratio Market capitalization compared to corporate book value

2.9x

EV / EBITDA Operating multiple reflecting core operational leverage

10.4x

EV / SALES Asset pricing multiple relative to total topline revenue

4.2x

Growth Story

Fourth Milling has demonstrated consistent top-line expansion, with revenue growing from SR 558,090,113 in FY 2023 to SR 617,484,534 in FY 2024, SR 660,405,945 in FY 2025, and reaching SR 669,518,315 on a TTM basis. Despite this steady historical revenue growth, the company's five-year average reinvestment rate stands at -11.56%, leading to a negative sustainable growth rate of -1.47%. This indicates that the company has historically prioritized distributing capital over heavy reinvestment, relying on existing capacity. However, ongoing capital projects—such as the expansion of the flour mill and feed production plant at the Al-Kharj branch and bran handling projects in Dammam—suggest a transition toward selective capacity expansion to support future localized growth.

Profitability Dynamics

The company exhibits exceptional profitability, driven by its secure operating model. With a TTM operating margin of 32.05% and a net profit margin of 30.08%, Fourth Milling converts a substantial portion of its revenues directly into earnings. This efficiency translates into a strong five-year average Return on Invested Capital of 12.73%, comfortably exceeding its Weighted Average Cost of Capital of 6.43%. This positive ROIC-vs-WACC gap of 6.29% highlights consistent economic value creation. Profitability is heavily anchored by the subsidized wheat agreement with the General Food Security Authority, which secures raw materials at a fixed rate of SR 180 per metric ton through 2046, shielding the company from global commodity price volatility and ensuring highly predictable cash flows.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

0.84

Cost of Equity Minimum required rate of return demanded by shareholders

8.0%

WACC Weighted average cost of total debt and equity funding

6.4%

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

31.2%

Risk Factors

Fourth Milling's risk profile is characterized by low systematic risk, reflected in a relevered beta of 0.838. While the company carries a total debt of SR 698,414,436, a significant portion of its long-term liabilities consists of lease obligations related to lands leased from the General Food Security Authority. Operational risks include regulatory compliance, highlighted by a SR 4,000,000 provision for a fine regarding flour mills production regulations, which the company is currently contesting in court. Additionally, while regional geopolitical developments introduce macro uncertainty, the company's localized operations and essential food-security status provide a defensive buffer against external shocks.

Governance Disclosures

Rating: B

We track 12 key governance and oversight matters for this company in our database.

Significance: 6/10 Info Asymmetry

Related Party Transactions with Parent Shareholders

The Company conducts commercial transactions with shareholders of its parent company (Gulf Flour Milling Industrial Company) and other related parties. For the three-month period ended 31 March 2026, sales to Abdullah Al-Othaim Markets Company were SR 5,026,901 (with rebates of SR 2,741,418) and sales to United Feed Manufacturing Company were SR 7,435,999.

Mitigating Factors: The terms of the transactions with related parties are approved by the Company’s management. Transactions with related parties are on the basis of contractual arrangements made with them.

Significance: 5/10 Propping

Absorption of IPO Costs by Parent Company

During the 2024 fiscal year, the parent company, Gulf Flour Milling Industrial Company, was charged SR 15.23 million for costs associated with the company's initial public offering, effectively absorbing these expenses on behalf of the company.

Mitigating Factors: The transaction was fully disclosed as a related party charge in the financial statements.

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In-Depth Analysis