August 3, 2023/CSL Research

Presco Plc (PRESCO) in its H1 2023 results reported a 15.3% y/y growth in Revenue to N48.07bn from N41.71bn (H1 2022). Also, on a q/q basis, Revenue was up 19.3% to N26.16bn (Q2 2023) from N21.92bn (Q1 2023). Its topline was driven by improved sales of CPO and Mill by-products.

The Cost of Sales (adjusted for depreciation) increased by 41.1 % y/y to N16.18bn from N11.47bn (H1 2022) and up 84% q/q. The company’s Gross margin declined in the reporting period to 66.3% from 72.2% (H1 2022). Although, Gross Profit grew marginally by 5.1% y/y to N31.89bn from N30.24bn in H1 2022.

Operating Expenses (adjusted for depreciation) moderated by 18.6% y/y to N6.96bn from N8.55bn in H1 2022. EBITDA increased by 15% y/y to N24.93bn (H1 2023) from N21.69bn (H1 2022). Provision for Depreciation & Amortisation grew by 4.6% y/y to N1.96bn (H1 2023) from N1.87bn (H1 2022) as the business acquired Plant Property & Equipment for production efficiency in H1 2023. The company recorded Operating Profit of N22.98bn (H1 2023), a 15.9% increase y/y.

In H1 2023, the company’s Finance Income increased from N350,000 to N9m although (insignificant when compared to the rise in finance cost) as we noticed a rise in Cash and Cash Equivalents balance by 125.1% to N17.71bn (H1 2023) from N7.87bn (FY 2022). Finance Cost rose marginally by 4.8% to N4.06bn (H1 2023) from N3.86bn (H1 2022). The company reported no FX revaluation loss. 

Overall, the business reported N18.93bn in Profit Before Tax, up 18.7% compared with N15.95bn in H1 2022 and Profit After Tax of N13.13bn compared with N11.61bn PAT in the corresponding period. 

We have a Buy recommendation on Presco with a price target of N337/s. Current price is N220/s.