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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

Underweight Neutral
Overweight Jamjoom Pharma
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 portfolio of 118
240
brands spanning 8 therapeutic segments and leadership positions in ophthalmology (#1
190
player) and dermatology (#2 player), it presently operates in about 36 countries. Its
140 margin profile is the best in its class and superior to that of the more experienced generic
90 players found worldwide. Over the next five years, the stock has potential for 24% FCF
40 growth and 15% bottom-line growth. With no debt, the business has plenty of space to
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expand through acquisitions, raise its payout ratio, and raise ROE levels. The strong
margins and return ratios indicate
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Jamjoom TASI
26-

the quality of the management as well as the moats of the business. The
19-
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24-
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27-
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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%
Gross Profit 594 695 800 Leadership position in niche TAs: JP concentrates on specialized treatment fields
GM Margin % 64.8% 64.8% 64.8% like Consumer Health, Derma, and Optha. In the KSA, it has a high ranking in the fields
YoY % 25.1% 17.1% 15.0% of consumer health, dermatology, and ophthalmology. These regions account for more
EBITDA 260 292 336 than 50% of its sales, and it has a top-three market share there. With the aid of
EBITDA Margin 28.3% 27.2% 27.2% technology and a capable sales force, JP has increased its market share significantly.
Net Income 171 246 284 Notably, it now holds the top spot in the GIT segment and leads the categories for
Net Income Margin % 18.7% 22.9% 23.0% vitamin D3, Optha and Derma in Iraq, and Vitamin D3.
ROE
YoY % 14%
0.4% 20%
43.7% 21%
15.4%
Strong R&D team and healthy product pipeline: JP invests significantly more in
R&D than its competitors do; over the past three years, it has averaged 4.3% of sales in
DPS Company data, Al Rajhi2.13
Source: Capital. 2.11 2.43
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
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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.
Jamjoo
Figure 7 Jamjoom Pharma’s
timeline
m
Pharma
became
Jamjoom Pharma
a
membe
r of
“Reyad
ah”
progra
m
under
comme
rcial Achieved Operation KSA’s
operat breakeven in >15 Visi >SAR 700mn Net
ions countri on 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 than Launch of 1st >100 Brands >35 countries
International SAR 200mn Ophthalmic unit registere
operations in Net Sales dose d in #1 Pharma
manufacturing KSA 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
Jamjoom Pharma
Pharmaceuticals: Healthcare 26
Jan 2024

IQVIA ranking
 Jamjoom Pharma
Pharmaceuticals: Healthcare 26
Jan 2024

Appendix G2: Board of Directors

Appendix G3:
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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
10% dedicated to the comprehensive cycle of
development, manufacturing, and strategic
marketing of a diverse spectrum of high-quality
635 branded generic pharmaceutical products. The
Employees
market outreach extends across 36 countries in the
Middle East, Africa, and the Commonwealth of
Independent States, with Saudi Arabia, Egypt,
Iraq, and the GCC countries serving as primary
Figure 11 Commercial team headcount by arenas of significant operations and sales.
country
Core operations:
the company specializes in producing
pharmaceutical products encompassing
therapeutic categories such as Ophthalmology,
Dermatology, General Medicine, 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
Jamjoom Pharma
Pharmaceuticals: Healthcare 26
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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” 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% 13% 19%
4% 4% 12% 14%
16% 17% 17%
10% 12% 11%
11% 11% 12%
12% 13%

60% 53%
64% 61%

2019 2020 2021 2026 Ophthalmology Dermatology General Other Consumer Health
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
Jamjoom Pharma
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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.
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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
GIT; 5 Health; 15
Jamjoom Pharma
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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

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
Jamjoom Pharma
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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%,

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)

200 140
180 120
160 100
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80
60 25
40
20 52
0 113

113

Current Current + Upcoming

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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

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

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

Advanced aseptic manufacturing Enhances bioavailability for p

in one continuous system soluble molecules

Reduces human in
risk o

Source: Company data, Al Rajhi Capital

Jamjoom Pharma
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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
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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 and tenders in KSA
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 exchange
2. Present in 36 countries rate
3. High level in targeting key markets to 2. Spimaco a very
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.
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Financials in Charts

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

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

60.0% 57.7%
11%
50.0
%
8%
33.8%
Top 10

40.0 29.8% 29.1% 28.3%

5% % 29.8%
4% 30.0
4% %
23.9 25.1% 25.5%
20.0%
3% % 25.7 23.2%
Others, 58% 3% 10.0% % 18.7%
21.4
2% 0.0% %
1% 2019 2020 2021 2022
2%
EBITDA Margin Gross Margin

Operating Margin Net Margin

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

Figure 5
1000.0 R&D and Capex as % of Sales Figure 6 Revenue mix by geography over the years

20.0% 100% 8% 9% 7%
18.4% 11% 6% 9% 10%
900.0 18.0% 90%
16.7% 916.7 9% 7% 7%
800.0 16.0% 80% 9%
7%
700.0 805.3 14.0% 70% 12% 12%
731.7 10%
735. 16%
600.0 701.3 12.0% 60%
7
500.0 10.0% 50%
9.6% 9.4%
400.0 8.0% 40%
300.0 6.7% 30% 67% 63% 64%
6.0% 57%
5.0
200.0 20%
3.3% 3.4%
% 3.6% 4.0%
100.0 4.5% 2.0% 10%
0.0 0.0% 0%
2018 2019 2020 2022 2019 2020 2021 2022
2021

Sales R&D as % of sales Capex as % of sales KSA Gulf Egypt Iraq North Africa and other export markets
Jamjoom Pharma
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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.
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Appendix G1: Business Model

Appendix A: Capacity and utilization:

Appendix B1: Income statement:

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

Appendix B3: Balance sheet:

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Appendix C1: Intangible assets and PP&E:

Appendix C2: Working capital

Appendix C3: Retained earnings and OCI:

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Appendix D1: Perpetuity and exit EBITDA multiple approaches:

Appendix D2: Cost of capital (WACC):

Appendix E1: Beta:

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Appendix F1: Free cash flow buildup:

Appendix F2: Fair Value per Share:

Appendix F3: Perpetuity and exit EBITDA

Analysis:
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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 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
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Pharmaceuticals: Healthcare 26
Jan 2024

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 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
Jamjoom Pharma
Pharmaceuticals: Healthcare 26
Jan 2024

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.