E Commerce Expansion And New Stores Will Drive Long Term Earnings Potential

Catalysts

About Al Meera Consumer Goods Company Q.P.S.C

Al Meera Consumer Goods Company Q.P.S.C operates a nationwide grocery retail network in Qatar, complemented by corporate and e commerce sales and rental income from its real estate portfolio.

What are the underlying business or industry changes driving this perspective?

• Continued ramp up of the recently opened New Mansoura and New Thumama branches is expected to lift sales density per square meter and support low to mid single digit revenue growth as these locations mature. This can enhance operating leverage and earnings.
• Rapid expansion in e commerce, with online sales growing about 41 percent year on year, positions Al Meera to capture shifting consumer spending toward digital channels. This can raise total revenue and improve net margins as order volumes scale over largely fixed technology costs.
• Expansion of corporate sales channels aligned with institutional demand can diversify away from highly competitive walk in retail traffic. This may drive more stable, higher ticket revenues and smoother earnings through contracted or recurring purchasing volumes.
• Disciplined cost control after a year of elevated operating expenditure growth, once new stores and channels normalize, should allow the company to sustain a structurally higher gross profit base while narrowing the gap between gross profit and operating profit. This would support margin expansion and net income growth.
• Stable, non correlated rental income from the company’s real estate assets can become a larger contributor to total profit as lease terms are refreshed and optimized over time. This may underpin earnings resilience and potentially support a higher valuation multiple.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Al Meera Consumer Goods Company Q.P.S.C's revenue will grow by 4.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 5.9% today to 5.8% in 3 years time.
• Analysts expect earnings to reach QAR 189.2 million (and earnings per share of QAR 0.87) by about December 2028, up from QAR 170.3 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 30.5x on those 2028 earnings, up from 17.6x today. This future PE is greater than the current PE for the QA Consumer Retailing industry at 17.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The competitive environment is intensifying in a largely stagnant Qatari grocery market with no meaningful population growth. Additional new stores from rivals could force Al Meera to cut prices or increase promotions, weighing on revenue growth and compressing net margins over time.
• Management has indicated that the recent uplift in gross margin is largely tied to new branch openings and will revert toward prior levels once expansion pauses. This could slow future earnings growth even if reported sales continue to rise at low single digit rates.
• Operating expenditures have already risen by 13.6 percent year on year against only 3.2 percent sales growth. If cost inflation in staffing, logistics and technology persists faster than revenue, the gap between gross profit and net profit could narrow and pressure earnings.
• Rental and other income have both declined compared to the prior year. If this trend continues due to weaker real estate demand or fewer non core opportunities, the company will rely more heavily on low growth retail operations, which could limit overall profit resilience and depress net income.
• E commerce sales are growing rapidly from a low base. If digital competitors or delivery platforms capture a disproportionate share of online grocery demand, Al Meera might face higher customer acquisition and fulfillment costs that dilute the contribution of this channel to revenue growth and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of QAR16.45 for Al Meera Consumer Goods Company Q.P.S.C based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of QAR18.4, and the most bearish reporting a price target of just QAR14.5.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be QAR3.3 billion, earnings will come to QAR189.2 million, and it would be trading on a PE ratio of 30.5x, assuming you use a discount rate of 19.5%.
  
• Given the current share price of QAR14.53, the analyst price target of QAR16.45 is 11.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.