January 31, 2024/CSL Research

Presco Plc (PRESCO) in its unaudited FY 2023 results reported a 27.3% y/y growth in Revenue to N103.14bn from N81.03bn (FY 2022). However, on a q/q basis, Revenue was down 8.8% to N26.3bn (Q4 2023) from N28.8bn (Q3 2023). This may be due to a decline in CPO price as observed in the quarter. The overall topline growth was driven by improved sales of CPO and mill by-products.

Cost of Sales (adjusted for depreciation) moved in tandem with Revenue, up 28.3 % y/y to N39.84bn from N31.06bn (FY 2022), and grew marginally q/q, up 1.4% q/q. The company’s Gross margin declined marginally in the reporting period to 61.4% from 61.7% (FY 2022). Meanwhile, Gross Profit grew by 26.7% y/y to N63.3bn from N49.97bn and was down 15.7% q/q.

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Operating Expenses (adjusted for depreciation) declined by 46.6% y/y to N11.52bn from N21.57bn in FY 2022 on the back of classified gain on revalued biological assets, which pushed EBITDA up by 82.3% y/y to N51.78bn from N28.41bn (FY 2022). EBIDTA was also up 9.3% q/q. CAPEX incurred in the period for business operations was lower compared to 2022 and provision for Depreciation & Amortisation declined marginally by 4.2% y/y to N3.98bn from N4.16bn (FY 2022). The company reported Operating Profit of N47.79bn, a 97.1%y/y increase, and N11.67bn in Q4 2023, a growth of 7.7% q/q.

The company’s Finance Income declined by 34.7%y/y to N24m from N37m which can be attributed to the significant decline of 80.9% y/y in Cash and Cash Equivalent balance to N1.5bn from N7.87b, while Finance Cost dropped marginally by 1% to N8.41bn from N8.49bn (FY 2022).

Overall, the business returned value for shareholders by reporting N30.42bn in Profit After Tax, up 131% y/y. Q/q, PAT of N6.95bn was reported in Q4 2023, down 17.2% q/q.

We maintain a Buy recommendation on Presco and a price target of N335/s. Current price is N259/s.

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