ADNOC Distribution: in the slow lane (downgraded to HOLD)

We have downgraded Abu Dhabi National Oil Company for Distribution (ADNOC Distribution) to HOLD (from Buy), with a new price target (PT) of AED 4.15 (from AED 4.36), offering upside of 0.9%. Momentum has plateaued and we see EBITDA growth of 5% per annum in the next five years. Growth in sales and retail sites has slowed and, for the domestic market, management’s focus has shifted to profitability. The additions of C-stores and the rising value added per store mean that unit profits have risen in the past few years. Growth in car washes and vehicle inspections are unlikely to maintain this momentum, in our view. The number of retail sites in Saudi Arabia doubled to almost 200 in 2025, but these generate much slimmer margins currently. The Egyptian business has been generating losses, due to the poor macro environment and currency depreciation since the acquisition. ADNOC Distribution has a well-defined dividend policy and reliable track record, but we expect yields to be around 5% in the next three years. We expect P/Es of 17.1x for 2026E and 15.1x by 2028E and EV/EBITDAs of 12.4x for 2026E and 11.2x for 2028E.