← Market Overview

4016

Governance: A

AVALON PHARMA

Middle East Pharmaceutical Industries Co.

59.00 SAR / Share

As of: May 28, 2026

11.3x P/E Ratio Trailing 12 Months

2.8x P/B Ratio Price to Book Value

5.3% Dividend Yield Annual Dividend / Share

1.18B SAR Market Cap Total Valuation

0.89 Beta Systematic Risk Index

21.2% Net Margin Net Profit / Revenue

The Story

Avalon Pharma is a high-return pharmaceutical manufacturer in Saudi Arabia, combining robust double-digit revenue growth with exceptional returns on capital and strategic capacity expansions.

Source: Q1 2026 (2026-05-12)

Value Creation +13.8% 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

5.3%

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

+10.8%

Payout Ratio Percent of net profits distributed as dividends

59.4%

Net Margin Net profit margin generated from total operational revenue

21.2%

ROIC Return on Invested Capital

21.9%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

11.3x

P/B Ratio Market capitalization compared to corporate book value

2.8x

EV / EBITDA Operating multiple reflecting core operational leverage

9.1x

EV / SALES Asset pricing multiple relative to total topline revenue

2.5x

Growth Story

Revenue has grown steadily from 338.4 million SAR in FY 2023 to 394.0 million SAR in FY 2024, 460.5 million SAR in FY 2025, and reached 493.3 million SAR on a TTM basis. This growth is supported by a 5-year average reinvestment rate of 49.22% and a high 5-year average ROIC of 21.88%, yielding a sustainable growth rate of 10.77%. The company is actively expanding its capacity, with assets under construction for factory expansions and a new factory expected to be completed by 2027, alongside a recent 5.25 million SAR land acquisition to expand its Avalon 1 facilities. This reinvestment strategy is funded partly by capitalizing 150 million SAR of retained earnings to increase share capital, demonstrating a clear commitment to long-term capacity building.

Profitability Dynamics

Avalon Pharma demonstrates exceptional value creation, with a 5-year average ROIC of 21.88% comfortably exceeding its WACC of 8.05%, creating a substantial positive spread of 13.83%. This profitability is driven by strong margins, with a TTM operating margin of 23.69% and a net profit margin of 21.19%, translating to a TTM net income of 104.5 million SAR. The company's high-margin private customer segment remains the primary driver of profitability, generating 91.9 million SAR of the 130.1 million SAR total revenue in the first quarter of 2026. These strong returns support consistent cash generation, enabling the company to distribute a 26.4 million SAR interim dividend for the second half of 2025 while maintaining robust capital expenditure of 34.4 million SAR TTM.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

0.89

Cost of Equity Minimum required rate of return demanded by shareholders

8.2%

WACC Weighted average cost of total debt and equity funding

8.1%

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

7.0%

Risk Factors

The company manages its financial risk through a mix of short-term Murabaha facilities and long-term development loans, carrying a total debt of 83.1 million SAR against a cash balance of 18.8 million SAR. While the company has secured long-term financing from the Saudi Industrial Development Fund (SIDF) and commercial banks—mortgaging several land title deeds as security—its low relevered beta of 0.89 reflects a relatively stable risk profile. Operational risks include the voluntary dissolution and winding-up of its UK subsidiaries initiated in early 2026 to streamline operations, and regional geopolitical developments which management continues to monitor. However, with a cost of debt after-tax of 5.89% and a cost of equity of 8.21%, the company's capital structure remains well-optimized to support its ongoing capital-intensive expansions.

Governance Disclosures

Rating: A

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

Significance: 3/10 Tunneling

Executive Compensation and Long-Term Incentive Plan (LTIP)

The Board of Directors approved a cash-based Long Term Incentive Plan (LTIP) for certain executives effective January 1, 2026, with three separate performance cycles ending in 2028, 2029, and 2030. As of March 31, 2026, the Group recognized an LTIP liability of SR 250,632. Total key management compensation and benefits for the period ended March 31, 2026, was SR 5,829,529, compared to SR 4,636,460 in the prior period, which includes board and committee remuneration of SR 837,500.

Mitigating Factors: Vesting of awards under each cycle is subject to the achievement of specified performance conditions including financial and non-financial key performance indicators (KPIs) and the continued employment of participants on the vesting date.

Significance: 3/10 Tunneling

Key Management and Board Remuneration

Total compensation for key management personnel reached SR 17,354,858 in 2025. This includes SR 14,766,121 in short-term benefits and SR 1,400,000 specifically for Board members' remuneration, which increased from SR 1,150,000 in the prior year.

Mitigating Factors: Remuneration is disclosed and allocated across cost of revenue, selling, and administrative expenses.

For more, click here to view the full governance profile →

In-Depth Analysis