30/4/2018/Cordros Report
Update: DANGSUGAR published Q1-18 result last Friday, showing EPS grew 12% y/y but declined 59% q/q. The EPS growth came on the back of a higher gross margin compared to last year’s one-off low, masking a disappointing revenue performance. Should we adjust Q1-17 gross margin to Q1-18’s 25% (which is also the average achieved in 2017FY), we have EPS of -55% y/y and -60% q/q.
Valuation: We revise TP lower to NGN17.42 (previously NGN17.97), reflecting the downward revision of revenue estimate. SELL rating maintained. On our estimates, DANGSUGAR is trading at 2018F P/E and EV/EBITDA multiples of 7.6x and 4.x respectively, consistent with its five-year historical averages of 7.9x and 4.4x, but below the 14.3x and 9.4x Middle Eastern peer averages.
Also discussed in the report:
- Volume still weak, despite lower price
- In-line gross margin estimate is unchanged
- Opex must be reined in
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