October 30, 2023/CSL Research

Okomu Oil Palm Plc (OKOMUOIL) in its 9M 2023 results reported a 20.9% y/y growth in Revenue to N60.65bn from N50.18bn (9M 2022). Also, on a q/q basis, Revenue increased, up 22.3% in Q3 2023 to N20.05bn from N16.39bn recorded in Q2 2023. We opine that rise in industrial and household demand for CPO contributed to the company’s Revenue.

The Cost of Sales (adjusted for depreciation) outgrew Revenue, up 31.6 % y/y to N18.96bn (9M 2023) from N14.41bn (9M 2022) and up 17.2% q/q. Even though the company’s Gross margin marginally declined to 68.7% from 71.3% (9M 2022). Gross Profit still maintained its uptrend, up 16.5% y/y to N41.69bn from N35.77bn 9M 2022.

Operating Expenses (adjusted for depreciation) rose 39.4% y/y to N14.87bn from N10.67bn in 9M2022 due to high business operating environment most companies are facing. EBITDA thinly rose by 6.9% y/y to N26.82bn (9M 2023) from N25.1bn (9M 2022). EBITDA Margin was down by 5.8ppts to 44.2% in 9M 2023 from 50% in 9M 2022. No Other Income from Export Expansion grant (EEG) was recorded this quarter.

In 9M 2023, the company’s Finance Income increased by 104.9% to N113m from N55m in 9M 2022, in tuned with the significant rise of 110.8% in Cash and Cash Equivalents Balance to N12.31bn (9M 2023) from N5.84bn (Dec 2022). Finance Cost jumped by 287.9% to N2.08bn (9M 2023) from N537m (9M 2022), with FX loss (N1.3bn) and interest on long-term loan (N740m) making up 63% and 35.5% respectively. Overall, Net Finance Cost was N1.97bn a 309% y/y increase.

Overall, the business reported N24.85bn in Profit Before Tax, down 0.9% compared with N24.6bn in 9M 2022 and a Profit After Tax of N20.92bn compared with N18.05bn PAT in the corresponding period, However on q/q, PAT was down by 21.6% to N4.72bn from N6.02bn in Q2 2023 due to the effect of EEG income presence in last quarter.

We retain a Buy recommendation on Okomu with a price target of N271/s. Current price is N236.8/s.

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