By Peet Serfontein & Jalpa Bhoolia
Dis-Chem is one of the leading pharmaceutical and consumer wellness groups in South Africa. Dis-Chem takes a 'Pharmacy First' approach with the main aim of serving the primary pharmaceutical needs of individuals. Other products on offer include personal and beauty products, health, nutrition and baby care products, as well as confectionery, dry grocery, household and other ancillary goods. The group utilises its wholesale business to service third parties and Dis-Chem retail pharmacies through its CJ distribution business.
Dis-Chem is the market leader in dispensary, and we are positive on the growth prospects in this space.
Technically, a developing rectangle pattern makes for a compelling investment opportunity (see the larger grey rectangle on the main chart).
The pattern forms when the price oscillates between parallel support and resistance levels, indicating consolidation. If the rectangle develops within an uptrend, it is often interpreted as a continuation pattern, suggesting that the price is likely to break out to the upside. A volume surge on a breakout above the resistance level confirms a bullish case as it signals strong market participation, thereby driving the price higher.
This share repeatedly tests a major resistance level (see the black arrows) without being significantly rejected, signalling persistent buying pressure. If the price consolidates just below resistance in a narrow range, it often forms a continuation pattern.
The share remains above its 200-day and 200-week simple moving averages.
We suggest a medium capital at-risk allocation to this trade.
| Share Information | |
|---|---|
| Share Code | DCP |
| Industry | Consumer Staples Distribution |
| Market Capital (ZAR) | 32.34 billion |
| One Year Total Return | 34.92% |
| Return Year-to-Date | 24.20% |
| Current Price (ZAR) | 37.60 |
| 52 Week High (ZAR) | 40.00 |
| 52 Week Low (ZAR) | 27.20 |
| Financial Year End | February |
| The share has made very good progress year-to-date, and technical indicators are supportive of further upside. Expect moderate volatility in the share price. | |
| Consensus Expectations (Bloomberg) | ||||
|---|---|---|---|---|
| FY24 | FY25E | FY26E | FY27E | |
| Headline Earnings per Share (ZAR) | 1.15 | 1.38 | 1.65 | 1.96 |
| Growth (%) | 19.98 | 20.00 | 18.85 | |
| Dividend Per Share (ZAR) | 0.46 | 0.54 | 0.65 | 0.77 |
| Growth (%) | 18.38 | 19.41 | 19.50 | |
| Forward PE (times) | 27.35 | 22.79 | 19.17 | |
| Forward Dividend Yield (%) | 1.44 | 1.72 | 2.05 | |
| Attractive double-digit earnings growth is expected over the forecast horizon. | ||||
Buy/Sell Rationale:
Technical Analysis:
Long term fundamental view:
| Share Name and Position | TBS - Take Profit (Close the position) |
INL - Stop Loss (Close the position) |
QLT - Time Exit (Close the position) |
|---|---|---|---|
| Entry | 224.91 | 139.53 | 31.11 |
| Current | 252.67 | 132.24 | 34.10 |
| Movement | +12.3% | -5.2% | +9.6% |
| The share has performed well so far, and we suggest taking profit and closing the position. | The stock unexpectedly triggered a stop-loss, leading to the closure of our positions. The strong downward price momentum is a significant concern. | The stock has reached our time exit date, and we closed the trade. |
| Share Name and Position | OMU - Buy (Continue to hold) |
CLS - BUY (Continue to hold) |
SHP - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 12.48 | 388.33 | 292.78 |
| Current | 12.69 | 392.90 | 295.79 |
| Movement | +1.7% | +1.2% | +1% |
|
A price building a base remains of interest. Fading downside price momentum is supportive. Remains above its 200-day simple moving average.
Our profit target is R14.40 with a trailing stop-loss at R12.00. Exit the trade on 17 December 2024. |
A rectangle pattern remains of interest. Remains above its 200-day simple moving average. Fading downside price movement supports the trade.
Our profit target is R444 with a trailing stop-loss at R357. Exit the trade on 10 November 2025. |
A price in a phase of low volatility remains of interest. Downside price momentum is a positive signal. Remains above its 200-day simple moving average.
Our profit target is R317.00 with a trailing stop-loss at R268. Exit the trade on 1 September 2025. |
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