Saudi Pharmaceutical Industries & Medical Appliances Corporation NOVEMBER Results Update 3 rd Quarter Research Division Company Reports

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1 NOVEMBER Saudi Pharmaceutical Industries & Medical Appliances Corporation Results Update 3 rd Quarter Research Division Company Reports Please read Disclaimer on the back All rights reserved, AlJAZIRA CAPITAL

2 RESEARCH DIVISION AGM - Head of Research Abdullah Alawi a.alawi@aljaziracapital.com.sa Senior Analyst Syed Taimure Akhtar s.akhtar@aljaziracapital.com.sa Analyst Saleh Al-Quati s.alquati@aljaziracapital.com.sa BROKERAGE AND INVESTMENT CENTERS DIVISION General Manager - Brokerage Division Ala a Al-Yousef a.yousef@aljaziracapital.com.sa AGM-Head of international and institutional brokerage Luay Jawad Al-Motawa lalmutawa@aljaziracapital.com.sa Regional Manager - West and South Regions Abdullah Al-Misbahi a.almisbahi@aljaziracapital.com.sa Area Manager - Qassim & Eastern Province Abdullah Al-Rahit aalrahit@aljaziracapital.com.sa Aljazira Capital is a Saudi Investment Company licensed by the Capital Market Authority (CMA), License No

3 November Saudi Pharmaceutical Industries & Medical Appliances Corp. Report Update SAUDI ARABIA Pharmaceuticals 3Q Healthy YoY earnings growth; subdued sequential performance: Saudi Pharmaceutical Industries & Medical Appliances Corp. (SPIMACO) s profit after tax (PAT) increased to SAR32mn (EPS: SAR0.41) in 3Q- from SAR30mn (EPS: SAR0.38) in 3Q The bottom line surged 8.9% YoY in line with the sales growth of 8.7% YoY. However, on a sequential basis earnings declined due to a slump in sales and higher investment income witnessed in 2Q-. The company s top line deviated from our forecast of SAR 276.9mn primarily due to higher-than-expected sales volumes. Rating: NEUTRAL Current Price: SAR month price target: SAR 42.3 Up-dated 12-M price target: SAR 42.3 Upside/(Downside): 0.5 Downward revision in earnings estimates: We revise our estimates downwards to reflect the company s performance during 9M. We cut our revenue estimates by 6.6% to SAR1,166mn from our earlier estimates of SAR1,249mn. Furthermore we reduced our COGS and SG&A estimates by 4.5% and 11.5% respectively. Consequently, our net profit estimate for declined 3.5% to SAR246mn from our earlier estimate of SAR255mn. Investment consideration and valuation: Considering SPIMACO s healthy performance in 3Q- as well as our current outlook and estimates, we maintain our 12-month price target of SAR42.3 per share. We believe the stock is fairly valued at the current market price as most positives have been factored into. Therefore, we reiterate our Neutral rating for the stock. Key financial updates 3Q- All figures in SAR mn, unless otherwise stated 3Q Q- 3Q- YoY-Change (3Q12/3Q11) QoQ-Change (3Q12/2Q12) Sales revenue % -20.7% COGS (102) (146) (114) 11.4% -21.7% Gross profit % -19.6% Gross margins 51.0% 49.2% 49.8% Operating profit % 13.9% Operating margin 15.9% 12.1% 17.4% Net profit % -64.1% Net margin 14.2% 31.4% 14.2% EPS (SAR) % -64.1% Key financial updates All figures in SAR mn, unless otherwise stated Earlier estimates New estimates Source: Aljazira Capital* "Upward/ (Downward) revision" Sales revenue 1,249 1, % COGS (610) (583) -4.5% Gross profit % Gross margins 51.2% 50.0% Operating profit % Operating margin 17.0% 17.6% Net profit % Net margin 20.4% 21.1% EPS (SAR) Source: Aljazira Capital*

4 November Updated Financial Statements Amount in SARmn, unless otherwise specified E 2013E 2014E 2015E Income statement Sales revenue 1,038 1,129 1,166 1,261 1,367 1,479 Growth YoY (%) 9.1% 8.8% 3.3% 8.2% 8.4% 8.2% Cost of sales (551) (569) (583) (631) (680) (738) Gross Profit Growth YoY (%) 15.9% 15.2% 4.1% 8.0% 9.0% 7.8% General & administration expenses (321) (370) (378) (404) (431) (459) Operating Profit Growth YoY (%) 13.4% 14.9% 8.0% 10.2% 13.0% 10.0% Interest expenses Investment and Other income/ expenses Profit before zakat & minority interest Minority Interest (16) (16) (17) (19) (21) (23) Net profit Growth YoY (%) 14.0% 19.1% 17.1% 10.8% 10.5% 8.3% Balance sheet Assets Cash & cash Equivalents Trade accounts receivable Amounts due from related parties Inventories Prepayments and other receivables Investments in available for sale securities 2,053 2,222 2,222 2,222 2,222 2,222 Investment in an associated company Property, Plant & Equipment Intangible Assets Total assets 3,456 3,738 3,847 4,033 4,234 4,464 Liabilities & owners' equity Employees' Terminal Benefits Accounts payable and accruals Amounts due to related parties Zakat and income tax Amounts due to shareholders Share Capital Statutory reserves Consensual reserve General Reserve Retained earnings Unrealized gains on revaluation of available for sale securities 1,174 1,344 1,344 1,344 1,344 1,344 Minority Interest Total owners' equity 2,938 3,185 3,288 3,414 3,566 3,741 Total equity & liabilities 3,456 3,738 3,847 4,033 4,234 4,464 Cashflows Statement Cash flow from operating activities Cash flow from investing activities (24) (52) (39) (35) (40) (46) Cash flow from financing activities 128 (106) (108) (107) (105) (103) Change in cash 241 (50) Net cash at end Key fundamental ratios Liquidity ratios Current ratio (x) Quick Ratio (x) Profitability ratios Gross Margin 46.9% 49.6% 50.0% 50.0% 50.3% 50.1% Operating margin 16.0% 16.9% 17.6% 18.0% 18.7% 19.0% Net Income Margin 17.0% 18.6% 21.1% 21.6% 22.1% 22.1% EBITDA margin 18.8% 19.6% 20.4% 20.8% 21.3% 21.6% Return on average assets 2.3% 2.1% 2.0% 1.9% 1.9% 1.8% Return on average equity 3.1% 2.6% 2.4% 2.3% 2.2% 2.1% Market/Valuation ratios EV/Sales (x) EV/EBITDA (x) EPS (SAR) BVPS (SAR) Market Price (SAR)* Market-Cap (SAR mn) 2,792 3,161 3,302 3,302 3,302 3,302 Dividend Yield 3.9% 3.4% 3.6% 3.6% 3.6% 3.6% P/E ratio (x) P/BV ratio (x) Source: Company annual reports & Aljazira capital * We have taken respective December closing prices for 2009 & 2010, while for years & onwards we used closing price of November 19,.

5 COMPANY PROFILE RATING TERMINOLOGY AlJazira Capital, the investment arm of Bank AlJazira, is a Shariaa Compliant Saudi Closed Joint Stock company and operating under the regulatory supervision of the Capital Market Authority. AlJazira Capital is licensed to conduct securities business in all securities business as authorized by CMA, including dealing, managing, arranging, advisory, and custody. AlJazira Capital is the continuation of a long success story in the Saudi Tadawul market, having occupied the market leadership position for several years. With an objective to maintain its market leadership position, AlJazira Capital is expanding its brokerage capabilities to offer further value-added services, brokerage across MENA and International markets, as well as offering a full suite of securities business. Overweight: This rating implies that the stock is currently trading at a discount to its 12 months price target. Stocks rated Overweight will typically provide an upside potential of over 10% from the current price levels over next twelve months. Underweight: This rating implies that the stock is currently trading at a premium to its 12 months price target. Stocks rated Underweight would typically decline by over 10% from the current price levels over next twelve months. Neutral: The rating implies that the stock is trading in the proximate range of its 12 months price target. Stocks rated Neutral is expected to stagnate within +/- 10% range from the current price levels over next twelve months. Suspension of rating or rating on hold (SR/RH): This basically implies suspension of a rating pending further analysis of a material change in the fundamentals of the company. For further queries about our special services, contact us at the toll free number

6 Disclaimer The purpose of producing this report is to present a general view on the company/economic sector/economic subject under research, and not to recommend a buy/sell/hold for any security or any other assets. Based on that, this report does not take into consideration the specific financial position of every investor and/or his/her risk appetite in relation to investing in the security or any other assets, and hence, may not be suitable for all clients depending on their financial position and their ability and willingness to undertake risks. It is advised that every potential investor seek professional advice from several sources concerning investment decision and should study the impact of such decisions on his/her financial/ legal/tax position and other concerns before getting into such investments or liquidate them partially or fully. The market of stocks, bonds, macroeconomic or microeconomic are of a volatile nature and could witness sudden changes without any prior warning, therefore, the investor in securities or other assets might face some unexpected risks and fluctuations. All the information, views and expectations and fair values or target prices contained in this report have been compiled or arrived at by AlJazira Capital from sources believed to be reliable, but AlJazira Capital has not independently verified the contents obtained from these sources and such information may be condensed or incomplete. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. AlJazira Capital shall not be liable for any loss as that may arise from the use of this report or its contents or otherwise arising in connection therewith. The past performance of any investment is not an indicator of future performance. Any financial projections, fair value estimates or price targets and statements regarding future prospects contained in this document may not be realized. The value of the security or any other assets or the return from them might increase or decrease. Any change in currency rates may have a positive or negative impact on the value/return on the stock or securities mentioned in the report. The investor might get an amount less than the amount invested in some cases. Some stocks or securities maybe, by nature, of low volume/trades or may become like that unexpectedly in special circumstances and this might increase the risk on the investor. Some fees might be levied on some investments in securities. This report has been written by professional employees in AlJazira Capital, and they undertake that neither them, nor their wives or children hold positions directly in any listed shares or securities contained in this report during the time of publication of this report. This report has been produced independently and separately and no party (in-house or outside) who might have interest whether direct or indirect have seen the contents of this report. It should be also noted that the Research Division of AlJazira Capital had no information at the time of issuing this report regarding any conflict of interest between the company/companies mentioned in this report and any members of the board / executives / employees of AlJazira Capital or any of Bank AlJazira Group companies. No part of this document may be reproduced whether inside or outside the Kingdom of Saudi Arabia without the written permission of AlJazira Capital. Persons who receive this document should make themselves aware, of and adhere to, any such restrictions. By accepting this document, the recipient agrees to be bound by the foregoing limitations. Asset Management Brokerage Corporate Finance Custody Advisory Head Office: Madinah Road, Mosadia P.O. Box: 6277, Jeddah 21442, Saudi Arabia Tel: Fax: