October 27, 2022/CSL Research

Cadbury Nigeria Plc’s 9M 2022 numbers showed a 41.6% y/y growth in Revenue to N42.54bn in 9M 2022 from N30.05bn in 9M 2021. However, Revenue moderated slightly by 2.8% q/q to N14.66bn in Q3 2022 from N15.09bn in Q2 2021. This was driven by a -7.58% q/q decline in the Revenue from the beverages category to N10.16bn in Q3 2022 from N10.99 bn in Q2 2022. The 9M Revenue growth was largely driven by the Beverages (Bournvita and 3-in-1 Hot Chocolate drink) business segment, which contributed 72% of the Revenue and grew by 52% y/y to N30.23bn in 9M 2022 from N19.88bn in 9M 2021. Sales of TomTom, Butter mint, and other confectioneries grew 26% to N11.32bn in 9M 2022 from N8.98bn in 9M 2021 and was up q/q by 9.21% to N4.12bn in Q3 2022 from N3.78b in Q2 2022. However, Revenue from Intermediate Cocoa Products continued to shrink, down by 16% (-8% in Q2) to N998m in 9M 2022 from N1.19bn in 9M 2021 but was up 19.5% q/q to N382m in Q3 2022 from N322m in Q2 2022. We believe that the recent increase in prices has continued to support Revenue growth.

The management has been able to keep input cost within control as Cost of Sales (ex-depreciation), grew slower than Revenue, up 40.8% y/y to N33.38bn in 9M 2022 from N23.72bn in 9M 2021. Hence, Gross Profit increased 44.6% y/y to N9.16bn in 9M 2022 from N6.33bn in 9M 2021 while Gross Margin inched up by 0.5ppt to 21.5% in 9M 2022 from 21.1% in 9M 2021.

Operating Expenses came in elevated as Administrative Expenses (adjusted for depreciation) grew by 223% to N977m in 9M 2022 from N302m in 9M 2021 while Selling & Distribution Expenses (adjusted for depreciation) increased by 20.3% to N3.83bn in 9M 2022 from N3.18bn in 9M 2021. Overall, EBITDA leaped further by 52.8% y/y to N4.36bn in 9M 2022 from N2.85m in 9M 2021. Likewise, EBITDA Margin inched up by 0.8p0pts to 10.2% to 9.5% in 9M 2022. The improvement in EBITDA Margin was driven by the slower increase in Cost and marginal decline in Opex margins.

Depreciation & Amortisation grew 7.8% y/y to N1.13bn in 9M 2022.  A 264.6% y/y increase in Other Income coupled with a 78.9% y/y growth in Operating Profit drove Earnings Before Interest and Tax (EBIT) higher by 81.1% y/y to N4.02bn in 9M 2022 from N2.16bn in 9M 2021.

Finance Income increased by 118.5% to N1.06bn in 9M 2022 from N483m in 9M 2021 as Cash and Cash Equivalent increased by 20.56% to N21.56bn in 9M 2022 from N17.82bn in 9M 2021. However, the company’s total borrowings increased by 52% to N16.03bn in 9M 2022 from N10.48 billion in 9M 2021, hence its Interest Expense grew significantly, up 129% to N343m in 9M 2022 from N149m in 9M 2021. Consequently, Net Finance Income increased by 113.7% y/y to N712m in 9M 2022 from N333m in 9M 2021

Net profit grew by 86.1% y/y to N2.82bn in 9M 2022 from N1.41bn in 9M 2021.

With a PE Ratio of 10.21x, Forecast EPS (FY’22) of N1.51, our price target of N15.47 offers 33% upside potential on the current price of N11.60 hence, we place a BUY recommendation on the shares of Cadbury.  

Cadbury Nigeria, 9M 2022 (Nm)

Source: Company, CSL Research