Dis-Chem (DCP) – Growing Pains

We calculate that the DCP working capital cycle could improve to 26 – 29 days from the current 37 days if it can successfully lower its inventory levels. Following DCP’s announcement that it was taking over pharmacies in Mediclinic hospitals, we estimate the additional uplift in dispensary sales of these pharmacies to be 0.3% of FY19 retail turnover. The upside may come from the chronic prescription customers filling repeat scripts at its non-hospital outlets. Under normal trading conditions with no one-off impacts, we believe DCP’s operational performance should normalise by FY22.