Dischem Pharmacies Ltd – Leading Pharmacy Group In SA
Dischem Pharmacies Ltd is a leading retail pharmacy operating in South Africa, Botswana, and Namibia. It’s the second-largest retail pharmacy chain in South Africa, with 184 stores, including 2 in Botswana and 4 in Namibia.
In 2016, the chain announced it planned to double its number of outlets through 2021. At that point, one-third of its outlets were under three years old.
Dischem sells its products via the internet, has private label products, has a wholesale division, and operates a loyalty program.
Dischem offers a variety of products, including:
- Beauty care
- Other health care products
Dischem Pharmacy serves self-medication centres, family clinics, and dispensaries in South Africa.
In 1978, pharmacists Ivan and Lynette Saltzman co-founded Dischem. Their first retail pharmacy store was opened in Mondeor, South of Johannesburg. The couple introduced the concept of a discount pharmacy with never-before-seen product categories in South African pharmacies.
Dischem opened its first store outside of South Africa in 2014 in Windhoek, Namibia.
The Dischem Group has a pharmacy first approach. This means that every one of their stores has a dispensary functioning the same hours as its front shop. The Group has positioned itself as a discount brand by following an Everyday Low Price (ELP) strategy.
The Wholesale division has three contributors to turnover:
- Dischem stores
- TLC franchisees
- Independent pharmacies
There are four fully operational distribution centres in Delmas, Midrand, Cape Town, and KZN.
Dischem’s Investment Case
Dis-Chem provides local and international investors with access to the South African Food and Drug Retail sector. Dsichem Group believes the following macroeconomic trends will benefit the company over the medium to long term:
- Ageing population
- Increased urbanization
- Growing middle class
- The move toward greater convenience with the business’s defensive nature
The following are unique to Dischem Pharmacies:
- Over 1,900 dispensing pharmacists employed
- The dispensary brings the most traffic into their stores
- About two million scripts get filled monthly
- They remain resilient within the Food and Drug Retail Industry and can conduct business in weak economic environments
- Their unique, focused approach to pharmacies differentiates them
Dischem Annual Financial Report – Year Ending Feb 2021
Dischem Group’s financial year ending February 2021 reported a 9.6% increase in revenue to R26.3 billion. This is despite the growing economic recession in South Africa.
Over the same year, earnings attributable to shareholders and headline earnings increased by 11.8%, while headline earnings per share rose by the same amount to 77.8 cents.
Retail operating profit was R1.2 billion, and the wholesale segment’s performance proceeded to improve, reporting an operating profit of R65 million.
Retail revenue grew to R23.4 billion, increasing by 7.6%, with comparable-store revenue at 2.7%.
Dischem Group opened 22 new stores, including three Mediclinic stores, and acquired two new pharmacies, totaling their store count to 194 stores at the end of February 2021. The Group announced that these new stores contributed R491 million to revenue.
Dis-Chem said it invested R311 million in additional stores and information technology advancements across both the retail and wholesale segments, including R88 million in SAP software licenses, for a total of R401 million in capital expenditure on intangible and tangible assets.
The remaining R90 million is for replacement costs to sustain the existing retail and wholesale networks.
The Group’s revenue climbed by 12.6 percent in the ten weeks ending May 10, 2021, compared to the previous similar period. Dis-Chem stated that it would continue to work with the government to combat the Covid-19 outbreak.
Dis-Chem has been vaccinating people over 60 years old and its healthcare workers since May 17, 2021. The company has acquired 32 specialized vaccination facilities, 11 of which would begin providing vaccines to the general public on May 24, 2021. When the J&J vaccine was to be available, it would get supplemented with capacity from in-store clinics.
The Group will be able to give up to 800,000 vaccines per month at full capacity.
The South African Competition Commission found Dischem guilty of inflating hygiene product costs during the COVID-19 outbreak in July 2020. They were instructed to pay a fine of R1.2 million.
In January and February 2021, Baby City contributed R128 million to revenue, accounting for 0.6% of total retail revenue growth.
On January 1, 2021, the Group paid R422 million for a 100% stake in Baby City. Baby City is a speciality destination baby boutique with 33 locations in South Africa. For the period ending February 28, 2021, Baby City provided R128 million to Group revenue.
Dischem Pharmacies Ltd (DCP.JO) Stock News
Dis-Chem Pharmacies Limited listed 27.5 percent of its listed share capital on the Johannesburg Stock Exchange in November 2016. It was the exchange’s second-largest initial public offering (IPO).
The Dischem JSE share price is currently R31.25 per share as of June 11, 2021.
The Group announced with its annual financial results for the year ending February 2021 that its dividend policy had been reinstated with a gross final cash payout of 31.1 cents per share. The first dividend payment for 2021 got paid on June 9, 2021, with a yield of 1%.
Dischem Pharmacies Ltd Stock Forecast
According to Wallet Investor, they predict Dischem stock to be a “good” long-term investment that can be a profitable investment option. Based on their forecasts, the Dischem stock price is expected to grow by 49.43% over the next five years, with the Dischem share price reaching R46.69. Over one year, Wallet Investor predicts the stock price to go up from R31.25 to R34.42, with an earning potential of 10.15%.
According to present data, Dischem Pharmacies’ shares have been bullish in the last 12 months, with the healthcare sector being popular in this period. Due to Dischem’s shares having a positive outlook, it’s been recommended to get added to your investment portfolio.
There’s no denying that Dischem Pharmacies Ltd has a proven track record. With its pharmacy first approach and winning retail business model, it can operate in resilient markets. With the Group’s desire to expand further, they continue to invest in warehouses, new stores, and information technology across Africa.
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