October 30, 2023/Cordros Report
NASCON Allied Industries Plc (NASCON) published its unaudited Q3-23 financials on Friday (27 October), in which the company reported a standalone EPS of NGN1.96 (Q3-22: NGN0.51), bringing 9M-23 EPS to NGN4.15 (9M-22: NGN1.09). The EPS increase was driven by the sturdy growth in sales (35.3% y/y) recorded in the reporting period. NASCON’s board has proposed an interim dividend of NGN1.00/s, implying a yield of 1.7% based on the last closing price of NGN58.00/s.
Q3-23 revenue grew by 35.3% y/y (9M-23: +45.6% y/y), driven by NASCON’s aggressive volume drive in its core geographical area of operations – the Northern region. As such, revenue from the North grew by 36.5% y/y, contributing 72.0% of the total sales outturn. In the same vein, revenue from the Western (+33.9% y/y | 22.0% of revenue) and Eastern (+27.2% y/y | 6.0% of revenue) regions maintained the momentum witnessed so far in 2023.
Sequentially, revenue declined by 1.5% q/q on a broad-based decline across the business’ regions – East (-5.5% q/q), North (-1.6% q/q) and West (-0.1% q/q).
Gross margin for the quarter increased by 17.95 ppts to 63.8% (9M-23: +16.60 ppts to 54.7%), buoyed by the aforementioned expansion in revenue (+35.3% y/y) and a 9.5% decline in cost of sales. We highlight that the lower cost print was driven by a 14.3% y/y decline in raw materials consumed. Consequently, EBITDA (+22.99 ppts y/y) and EBIT (+24.01 ppts y/y) margins increased markedly to 40.7% and 37.7%, respectively, even as operating expenses increased by 32.3% y/y.
Further down, NASCON’s net finance cost grew by 69.8% y/y, underpinned by a 56.3% y/y increase in finance cost due to higher interest on borrowings (+190.3% y/y). Meanwhile, finance income grew by 41.3% y/y.
Overall, profit before tax grew by 285.1% y/y to NGN7.68 billion (Q3-22: NGN2.00 billion). Following an effective tax rate of 32.5%, profit after tax printed NGN5.19 billion (Q3-22: NGN1.35 billion), translating to a growth of 285.1% y/y.
Comment: We like that NASCON sustained its impressive performance from the start of the year, following its impressive sales performance and efficient cost management. Considering the resilience witnessed in 2023, we expect the company to see out the year positively, maintaining robust expansions in its top and bottom lines. Our estimates are under review.
