October 26, 2016/Cordros Research

Last week (Friday), CADBURY released results for nine months and third quarter ended September 2016. The key features of the third quarter result are (1) y/y and q/q revenue growth — after a disappointing second quarter and (2) elevated cost pressure — which more than offset savings on operating expenses and resulted in a LAT. Combining Q3 with the half year results leaves revenue over nine months of 2016 slightly (1.2%) above 2015 equivalent, but the company declared a loss after tax.

We have revised estimates for CADBURY, considering the (1) price hikes taken late in September and middle of this month; (2) unabating cost pressure which management is unable to fully pass on; and (3) considerable savings in operating expenses.

We roll forward valuation to 2017 and arrive at N20.71 TP (previously N19.82). While the TP suggests impressive upside from current market value, investors are more likely to remain averse to CADBURY’s shares in the near term considering (1) the likelihood of negative earnings in 2016F; (2) Nigerian investor negative perception of the company; and (3) limited visibility on the efforts of management to improve the performance of the company.

Click here to view Cadbury Nigeria Plc Q3 2016 Report