May 2, 2018/Cordros Report

Update: CCNN started 2018 on an impressive note, reporting EPS growth of 111% y/y to NGN0.86, which when annualized, is almost 2x market expectation. The EPS is only 9% below the company’s single-quarter best of NGN0.95 recorded in Q4-17. The impressive Q1-18 performance is broad-based, and in our view, is one of the company’s best yet, when the significant difference in prices in the recent past quarters is adjusted for.

Earnings estimate and valuation: Compared to our previous estimate, we revise 2018E net profit higher by 16% to reflect the changes on the gross margin line. On 2017FY results, our revised net profit estimate is higher by 13% (previously -3%). On our revised estimates, we have a DCF-based TP of NGN17.82 (previously NGN15.64) for CCNN and maintain SELL. The stock has gained 115 YtD and is trading at forward (2018E) P/E and EV/EBITDA multiples of 7.0x and 4.0x respectively, consistent with its five-year historical averages.

Also discussed in the report:

• Better volume, higher price support revenue

• Another gross margin outperformance on the horizon?

• Other profitability ratios are equally impressive

• Balance sheet

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