March 19, 2025/Cordros Report
In this report, we update our outlook on Dangote Cement Plc (DANGCEM) and outline our expectations for 2025E. In 2024FY, DANGCEM reported a 62.2% y/y increase in revenue (Cordros estimates: +54.3% y/y) driven by a 59.7% y/y rise in prices and modest volume growth of 1.6% y/y. This topline performance translated into a 12.3% y/y in EPS, reaching NGN29.74 (Cordros forecast: NGN23.60) despite facing cost pressures and currency headwinds during the period. For 2025E, we expect a deceleration in revenue growth relative to 2024FY, driven by a modest increase in both sales volume and prices. Consequently, we assign a 12-month target price of NGN459.65/s and maintain a “HOLD” rating on the stock. On our 2025E EPS of NGN38.07 (+28.0% y/y), we estimate a DPS of NGN35.00 (91.9% dividend payout ratio), translating to a 7.3% dividend yield based on the closing price of NGN480.00/s (as of 18 March). On our estimates, DANGCEM is trading at a 2025E P/E of 12.6x and an EV/EBITDA of 6.2x.
Modest price/volume growth to drive revenue and earnings expansion: For 2025E, we project aggregate revenue growth of 22.9% y/y, reflecting revenue increases in both the Nigeria (+12.3% y/y | 56.0% of revenue) and Pan African (+30.8% y/y | 44.0% of revenue) markets. In Nigeria, we anticipate revenue growth to be driven by a 2.0% y/y increase in sales volume to 18.05Mt and a 10.0% rise in average prices to NGN136,000.00/t. The growth in sales volume will be supported by increased infrastructure investment, particularly from the public sector, and higher residential construction activity. In the Pan African market, we expect revenue to be driven by a 2.4% y/y increase in sales volume to 11.40Mt, reflecting growth in Tanzania (+3.5% y/y), Ethiopia (+3.3% y/y), and Zambia (+3.3% y/y). Additionally, we forecast a 27.7% y/y increase in average prices to USD102.00/t (NGN170,000.00/t) in the region. Export revenue is also expected to rise, with export contribution increasing by 2.0% to 9.5% (2024: 7.5%). On the cost side, we project a 20.0% y/y increase in COGS and a 24.3% y/y rise in OPEX, driven primarily by higher costs for raw materials (+17.4% y/y), energy (+25.1% y/y), and haulage (+28.8% y/y). Consequently, we expect the EBITDA margin to settle slightly lower at 38.5% (2024: 38.6%). All told, we forecast an EPS of NGN38.07 (+28.0% y/y), supported by a 3.9% y/y reduction in finance costs (interest expenses: +7.6% y/y, FX losses: -23.5% y/y) to NGN672.77 billion.
Sustained cost pressures to weigh on EBITDA margin: Despite DANGCEM’s ongoing efforts to enhance cost efficiency—such as increasing the use of alternative fuel and integrating CNG trucks into its operations—we project a slight decline in EBITDA margin to 38.5% in 2025, down marginally from 38.6% in 2024. Our forecast reflects our expectations of residual cost pressures stemming from currency volatility, inflation, and fluctuations in energy prices, particularly in the Pan-African market. These factors are expected to drive higher costs in raw materials, energy, and haulage, exerting downward pressure on operating performance and offsetting the benefits from DANGCEM’s cost efficiency initiatives.
Valuation: Our year-end target price is NGN459.65/s, derived from a 50/50 blend of DCF and sector-relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN351.80/s) and FCFE (NGN347.08/s) estimates, assuming a 22.3% WACC and 4.0% terminal growth rate. Meanwhile we utilised Bloomberg’s Middle East and African peer average 2025E P/E (14.5x) and EV/EBITDA (7.3x) to arrive at a FV of NGN552.22/s and NGN587.48/s, respectively
